Correlation Between Nathans Famous and Compass Group
Can any of the company-specific risk be diversified away by investing in both Nathans Famous 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 Nathans Famous and Compass Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nathans Famous and Compass Group PLC, you can compare the effects of market volatilities on Nathans Famous 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 Nathans Famous with a short position of Compass Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nathans Famous and Compass Group.
Diversification Opportunities for Nathans Famous and Compass Group
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nathans and Compass is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Nathans Famous 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 Nathans Famous 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 Nathans Famous 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 Nathans Famous i.e., Nathans Famous and Compass Group go up and down completely randomly.
Pair Corralation between Nathans Famous and Compass Group
Given the investment horizon of 90 days Nathans Famous is expected to generate 1.52 times less return on investment than Compass Group. In addition to that, Nathans Famous is 2.57 times more volatile than Compass Group PLC. It trades about 0.04 of its total potential returns per unit of risk. Compass Group PLC is currently generating about 0.17 per unit of volatility. If you would invest 3,351 in Compass Group PLC on August 30, 2024 and sell it today you would earn a total of 121.00 from holding Compass Group PLC or generate 3.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nathans Famous vs. Compass Group PLC
Performance |
| Timeline |
| Nathans Famous |
| Compass Group PLC |
Nathans Famous and Compass Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nathans Famous and Compass Group
The main advantage of trading using opposite Nathans Famous and Compass Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nathans Famous 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.| Nathans Famous vs. Noble Romans | Nathans Famous vs. Good Times Restaurants | Nathans Famous vs. Bagger Daves Burger | Nathans Famous vs. Flanigans Enterprises |
| Compass Group vs. McDonalds | Compass Group vs. Starbucks | Compass Group vs. Chipotle Mexican Grill | Compass Group vs. Yum Brands |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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