Correlation Between Marstons PLC and Compass Group
Can any of the company-specific risk be diversified away by investing in both Marstons PLC and Compass Group at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Marstons PLC and Compass Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Marstons PLC and Compass Group PLC, you can compare the effects of market volatilities on Marstons PLC and Compass Group and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Marstons PLC with a short position of Compass Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marstons PLC and Compass Group.
Diversification Opportunities for Marstons PLC and Compass Group
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Marstons and Compass is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Marstons PLC and Compass Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Group PLC and Marstons PLC is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Marstons PLC are associated (or correlated) with Compass Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Group PLC has no effect on the direction of Marstons PLC i.e., Marstons PLC and Compass Group go up and down completely randomly.
Pair Corralation between Marstons PLC and Compass Group
If you would invest 3,373 in Compass Group PLC on August 28, 2024 and sell it today you would lose (2.00) from holding Compass Group PLC or give up 0.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Marstons PLC vs. Compass Group PLC
Performance |
| Timeline |
| Marstons PLC |
| Compass Group PLC |
Marstons PLC and Compass Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Marstons PLC and Compass Group
The main advantage of trading using opposite Marstons PLC and Compass Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marstons PLC position performs unexpectedly, Compass Group can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Compass Group will offset losses from the drop in Compass Group's long position.The idea behind Marstons PLC and Compass Group PLC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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