Correlation Between Compass Minerals and Avalon Advanced

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

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

Diversification Opportunities for Compass Minerals and Avalon Advanced

0.0

Correlation Coefficient

Compass Minerals  Avalon Advanced

Pay attention - limited upside

The 3 months correlation between Compass and Avalon is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Compass Minerals International and Avalon Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avalon Advanced Materials and Compass Minerals 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 Compass Minerals International are associated (or correlated) with Avalon Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avalon Advanced Materials has no effect on the direction of Compass Minerals i.e., Compass Minerals and Avalon Advanced go up and down completely randomly.

Pair Corralation between Compass Minerals and Avalon Advanced

If you would invest  1,059  in Compass Minerals International on December 21, 2024 and sell it today you would lose (31.00) from holding Compass Minerals International or give up 2.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Compass Minerals International  vs.  Avalon Advanced Materials

Compass Minerals Int

Risk-Adjusted Performance

Very Weak

Over the last 90 days Compass Minerals International has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable primary indicators, Compass Minerals is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Avalon Advanced Materials

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Compass Minerals and Avalon Advanced

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

The idea behind Compass Minerals International and Avalon Advanced Materials 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.