Correlation Between Young Cos and Compass Group
Can any of the company-specific risk be diversified away by investing in both Young Cos 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 Young Cos and Compass Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Young Cos Brewery and Compass Group PLC, you can compare the effects of market volatilities on Young Cos 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 Young Cos with a short position of Compass Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Young Cos and Compass Group.
Diversification Opportunities for Young Cos and Compass Group
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Young and Compass is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Young Cos Brewery 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 Young Cos 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 Young Cos Brewery 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 Young Cos i.e., Young Cos and Compass Group go up and down completely randomly.
Pair Corralation between Young Cos and Compass Group
Assuming the 90 days trading horizon Young Cos Brewery is expected to under-perform the Compass Group. In addition to that, Young Cos is 1.72 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 0.11 per unit of volatility. If you would invest 200,908 in Compass Group PLC on September 14, 2024 and sell it today you would earn a total of 66,392 from holding Compass Group PLC or generate 33.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Young Cos Brewery vs. Compass Group PLC
Performance |
| Timeline |
| Young Cos Brewery |
| Compass Group PLC |
Young Cos and Compass Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Young Cos and Compass Group
The main advantage of trading using opposite Young Cos and Compass Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Young Cos 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.| Young Cos vs. Berkshire Hathaway | Young Cos vs. Hyundai Motor | Young Cos vs. Samsung Electronics Co | Young Cos vs. Samsung Electronics Co |
| Compass Group vs. GoldMining | Compass Group vs. Fortune Brands Home | Compass Group vs. Hochschild Mining plc | Compass Group vs. Young Cos Brewery |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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