Correlation Between COMPASS GROUP and Food Life
Can any of the company-specific risk be diversified away by investing in both COMPASS GROUP and Food Life 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 COMPASS GROUP and Food Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between COMPASS GROUP and Food Life Companies, you can compare the effects of market volatilities on COMPASS GROUP and Food Life 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 COMPASS GROUP with a short position of Food Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of COMPASS GROUP and Food Life.
Diversification Opportunities for COMPASS GROUP and Food Life
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between COMPASS and Food is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding COMPASS GROUP and Food Life Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Food Life Companies and COMPASS GROUP 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 COMPASS GROUP are associated (or correlated) with Food Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Food Life Companies has no effect on the direction of COMPASS GROUP i.e., COMPASS GROUP and Food Life go up and down completely randomly.
Pair Corralation between COMPASS GROUP and Food Life
Assuming the 90 days horizon COMPASS GROUP is expected to generate 0.52 times more return on investment than Food Life. However, COMPASS GROUP is 1.93 times less risky than Food Life. It trades about 0.07 of its potential returns per unit of risk. Food Life Companies is currently generating about 0.0 per unit of risk. If you would invest 2,211 in COMPASS GROUP on August 29, 2024 and sell it today you would earn a total of 809.00 from holding COMPASS GROUP or generate 36.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
COMPASS GROUP vs. Food Life Companies
Performance |
| Timeline |
| COMPASS GROUP |
| Food Life Companies |
COMPASS GROUP and Food Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with COMPASS GROUP and Food Life
The main advantage of trading using opposite COMPASS GROUP and Food Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COMPASS GROUP position performs unexpectedly, Food Life 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 Food Life will offset losses from the drop in Food Life's long position.| COMPASS GROUP vs. Strategic Investments AS | COMPASS GROUP vs. PennantPark Investment | COMPASS GROUP vs. Chuangs China Investments | COMPASS GROUP vs. LG Display Co |
| Food Life vs. Superior Plus Corp | Food Life vs. NMI Holdings | Food Life vs. Origin Agritech | Food Life vs. SIVERS SEMICONDUCTORS AB |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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