Correlation Between Compass Group and Fiesta Restaurant

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

By analyzing existing cross correlation between Compass Group PLC and Fiesta Restaurant Group, you can compare the effects of market volatilities on Compass Group and Fiesta Restaurant 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 Group with a short position of Fiesta Restaurant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Group and Fiesta Restaurant.

Diversification Opportunities for Compass Group and Fiesta Restaurant

0.29

Correlation Coefficient

Compass Group  Fiesta Restaurant

Modest diversification

The 3 months correlation between Compass and Fiesta is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Compass Group PLC and Fiesta Restaurant Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fiesta Restaurant and Compass Group 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 Group PLC are associated (or correlated) with Fiesta Restaurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fiesta Restaurant has no effect on the direction of Compass Group i.e., Compass Group and Fiesta Restaurant go up and down completely randomly.

Pair Corralation between Compass Group and Fiesta Restaurant

If you would invest  3,204  in Compass Group PLC on October 6, 2024 and sell it today you would earn a total of  156.00  from holding Compass Group PLC or generate 4.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.61%
Values	Daily Returns

Compass Group PLC  vs.  Fiesta Restaurant Group

Compass Group PLC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Compass Group PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Compass Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fiesta Restaurant

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fiesta Restaurant Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Fiesta Restaurant is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Compass Group and Fiesta Restaurant

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

The idea behind Compass Group PLC and Fiesta Restaurant Group 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.