Correlation Between Stellar and Compass Group
Can any of the company-specific risk be diversified away by investing in both Stellar 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 Stellar and Compass Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stellar and Compass Group PLC, you can compare the effects of market volatilities on Stellar 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 Stellar with a short position of Compass Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stellar and Compass Group.
Diversification Opportunities for Stellar and Compass Group
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Stellar and Compass is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Stellar 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 Stellar 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 Stellar 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 Stellar i.e., Stellar and Compass Group go up and down completely randomly.
Pair Corralation between Stellar and Compass Group
Assuming the 90 days trading horizon Stellar is expected to generate 8.28 times more return on investment than Compass Group. However, Stellar is 8.28 times more volatile than Compass Group PLC. It trades about 0.1 of its potential returns per unit of risk. Compass Group PLC is currently generating about 0.09 per unit of risk. If you would invest 8.60 in Stellar on November 2, 2024 and sell it today you would earn a total of 34.40 from holding Stellar or generate 400.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 59.64% |
| Values | Daily Returns |
Stellar vs. Compass Group PLC
Performance |
| Timeline |
| Stellar |
| Compass Group PLC |
Stellar and Compass Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stellar and Compass Group
The main advantage of trading using opposite Stellar and Compass Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stellar 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 Stellar 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.| Compass Group vs. Take Two Interactive Software | Compass Group vs. Micron Technology | Compass Group vs. Aptitude Software Group | Compass Group vs. Naked Wines plc |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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