Correlation Between Broadwind and COMPASS GROUP

Can any of the company-specific risk be diversified away by investing in both Broadwind 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 Broadwind and COMPASS GROUP into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Broadwind and COMPASS GROUP, you can compare the effects of market volatilities on Broadwind 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 Broadwind with a short position of COMPASS GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Broadwind and COMPASS GROUP.

Diversification Opportunities for Broadwind and COMPASS GROUP

-0.23

Correlation Coefficient

Broadwind  COMPASS GROUP

Very good diversification

The 3 months correlation between Broadwind and COMPASS is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Broadwind and COMPASS GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMPASS GROUP and Broadwind 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 Broadwind 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 has no effect on the direction of Broadwind i.e., Broadwind and COMPASS GROUP go up and down completely randomly.

Pair Corralation between Broadwind and COMPASS GROUP

Assuming the 90 days trading horizon Broadwind is expected to under-perform the COMPASS GROUP. In addition to that, Broadwind is 1.9 times more volatile than COMPASS GROUP. It trades about -0.11 of its total potential returns per unit of risk. COMPASS GROUP is currently generating about -0.03 per unit of volatility. If you would invest  3,021  in COMPASS GROUP on December 22, 2024 and sell it today you would lose (121.00) from holding COMPASS GROUP or give up 4.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Broadwind  vs.  COMPASS GROUP

Broadwind

Risk-Adjusted Performance

Very Weak

Over the last 90 days Broadwind has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

COMPASS GROUP

Risk-Adjusted Performance

Very Weak

Over the last 90 days COMPASS GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, COMPASS GROUP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Broadwind and COMPASS GROUP

The main advantage of trading using opposite Broadwind and COMPASS GROUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Broadwind 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 Broadwind and COMPASS GROUP 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.