Correlation Between Compass Minerals and Ferroglobe PLC

Can any of the company-specific risk be diversified away by investing in both Compass Minerals and Ferroglobe PLC 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 Ferroglobe PLC 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 Ferroglobe PLC, you can compare the effects of market volatilities on Compass Minerals and Ferroglobe PLC 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 Ferroglobe PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Minerals and Ferroglobe PLC.

Diversification Opportunities for Compass Minerals and Ferroglobe PLC

0.79

Correlation Coefficient

Compass Minerals  Ferroglobe PLC

Poor diversification

The 3 months correlation between Compass and Ferroglobe is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Compass Minerals International and Ferroglobe PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferroglobe PLC 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 Ferroglobe PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferroglobe PLC has no effect on the direction of Compass Minerals i.e., Compass Minerals and Ferroglobe PLC go up and down completely randomly.

Pair Corralation between Compass Minerals and Ferroglobe PLC

Considering the 90-day investment horizon Compass Minerals International is expected to under-perform the Ferroglobe PLC. In addition to that, Compass Minerals is 1.49 times more volatile than Ferroglobe PLC. It trades about -0.19 of its total potential returns per unit of risk. Ferroglobe PLC is currently generating about -0.19 per unit of volatility. If you would invest  440.00  in Ferroglobe PLC on December 2, 2024 and sell it today you would lose (97.00) from holding Ferroglobe PLC or give up 22.05% of portfolio value over 90 days.

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

Compass Minerals International  vs.  Ferroglobe PLC

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 unsteady performance in the last few months, the Stock's primary indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Ferroglobe PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ferroglobe PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Compass Minerals and Ferroglobe PLC

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

The idea behind Compass Minerals International and Ferroglobe PLC 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.