Correlation Between Wingstop and Compass Group
Can any of the company-specific risk be diversified away by investing in both Wingstop 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 Wingstop and Compass Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wingstop and Compass Group PLC, you can compare the effects of market volatilities on Wingstop 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 Wingstop with a short position of Compass Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wingstop and Compass Group.
Diversification Opportunities for Wingstop and Compass Group
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Wingstop and Compass is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Wingstop 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 Wingstop 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 Wingstop 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 Wingstop i.e., Wingstop and Compass Group go up and down completely randomly.
Pair Corralation between Wingstop and Compass Group
Given the investment horizon of 90 days Wingstop is expected to generate 1.53 times more return on investment than Compass Group. However, Wingstop is 1.53 times more volatile than Compass Group PLC. It trades about 0.07 of its potential returns per unit of risk. Compass Group PLC is currently generating about 0.06 per unit of risk. If you would invest 19,244 in Wingstop on August 31, 2024 and sell it today you would earn a total of 13,633 from holding Wingstop or generate 70.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 85.56% |
| Values | Daily Returns |
Wingstop vs. Compass Group PLC
Performance |
| Timeline |
| Wingstop |
| Compass Group PLC |
Wingstop and Compass Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wingstop and Compass Group
The main advantage of trading using opposite Wingstop and Compass Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wingstop 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.| Wingstop vs. RLJ Lodging Trust | Wingstop vs. Aquagold International | Wingstop vs. Stepstone Group | Wingstop vs. Morningstar Unconstrained Allocation |
| Compass Group vs. The Cheesecake Factory | Compass Group vs. Darden Restaurants | Compass Group vs. Wingstop | Compass Group vs. Dominos Pizza |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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