Correlation Between CompX International and Snap On

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

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

Diversification Opportunities for CompX International and Snap On

-0.12

Correlation Coefficient

CompX International  Snap On

Good diversification

The 3 months correlation between CompX and Snap is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding CompX International and Snap On in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snap On and CompX International 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 CompX International are associated (or correlated) with Snap On. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snap On has no effect on the direction of CompX International i.e., CompX International and Snap On go up and down completely randomly.

Pair Corralation between CompX International and Snap On

Considering the 90-day investment horizon CompX International is expected to generate 7.62 times more return on investment than Snap On. However, CompX International is 7.62 times more volatile than Snap On. It trades about 0.07 of its potential returns per unit of risk. Snap On is currently generating about -0.39 per unit of risk. If you would invest  2,632  in CompX International on September 27, 2024 and sell it today you would earn a total of  140.00  from holding CompX International or generate 5.32% return on investment over 90 days.

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

CompX International  vs.  Snap On

CompX International

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days CompX International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, CompX International is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Snap On

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Snap On are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Snap On sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CompX International and Snap On

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

The idea behind CompX International and Snap On 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.