Correlation Between Compass Minerals and Largo Resources

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

Diversification Opportunities for Compass Minerals and Largo Resources

-0.04

Correlation Coefficient

Compass Minerals  Largo Resources

Good diversification

The 3 months correlation between Compass and Largo is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Compass Minerals International and Largo Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Largo Resources 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 Largo Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Largo Resources has no effect on the direction of Compass Minerals i.e., Compass Minerals and Largo Resources go up and down completely randomly.

Pair Corralation between Compass Minerals and Largo Resources

Considering the 90-day investment horizon Compass Minerals International is expected to under-perform the Largo Resources. But the stock apears to be less risky and, when comparing its historical volatility, Compass Minerals International is 1.17 times less risky than Largo Resources. The stock trades about -0.05 of its potential returns per unit of risk. The Largo Resources is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  169.00  in Largo Resources on December 27, 2024 and sell it today you would earn a total of  12.00  from holding Largo Resources or generate 7.1% return on investment over 90 days.

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

Compass Minerals International  vs.  Largo Resources

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 latest unsteady performance, the Stock's primary indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Largo Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Largo Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Largo Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Compass Minerals and Largo Resources

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

The idea behind Compass Minerals International and Largo Resources 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.