Correlation Between Bill and CompoSecure

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

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

Diversification Opportunities for Bill and CompoSecure

0.6

Correlation Coefficient

Bill  CompoSecure

Poor diversification

The 3 months correlation between Bill and CompoSecure is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Bill Com Holdings and CompoSecure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CompoSecure and Bill 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 Bill Com Holdings are associated (or correlated) with CompoSecure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CompoSecure has no effect on the direction of Bill i.e., Bill and CompoSecure go up and down completely randomly.

Pair Corralation between Bill and CompoSecure

Given the investment horizon of 90 days Bill Com Holdings is expected to generate 0.67 times more return on investment than CompoSecure. However, Bill Com Holdings is 1.49 times less risky than CompoSecure. It trades about 0.23 of its potential returns per unit of risk. CompoSecure is currently generating about 0.06 per unit of risk. If you would invest  5,473  in Bill Com Holdings on October 9, 2024 and sell it today you would earn a total of  3,277  from holding Bill Com Holdings or generate 59.88% return on investment over 90 days.

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

Bill Com Holdings  vs.  CompoSecure

Bill Com Holdings

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bill Com Holdings are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile essential indicators, Bill disclosed solid returns over the last few months and may actually be approaching a breakup point.

CompoSecure

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CompoSecure are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, CompoSecure showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bill and CompoSecure

The main advantage of trading using opposite Bill and CompoSecure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bill position performs unexpectedly, CompoSecure 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 CompoSecure will offset losses from the drop in CompoSecure's long position.

The idea behind Bill Com Holdings and CompoSecure 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.

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.