Correlation Between Compass Group and Jollibee Foods

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

Diversification Opportunities for Compass Group and Jollibee Foods

-0.3

Correlation Coefficient

Compass Group  Jollibee Foods

Very good diversification

The 3 months correlation between Compass and Jollibee is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Compass Group PLC and Jollibee Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jollibee Foods 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 Jollibee Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jollibee Foods has no effect on the direction of Compass Group i.e., Compass Group and Jollibee Foods go up and down completely randomly.

Pair Corralation between Compass Group and Jollibee Foods

Assuming the 90 days horizon Compass Group is expected to generate 66.5 times less return on investment than Jollibee Foods. But when comparing it to its historical volatility, Compass Group PLC is 36.82 times less risky than Jollibee Foods. It trades about 0.08 of its potential returns per unit of risk. Jollibee Foods is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  156.00  in Jollibee Foods on October 3, 2024 and sell it today you would earn a total of  300.00  from holding Jollibee Foods or generate 192.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.15%
Values	Daily Returns

Compass Group PLC  vs.  Jollibee Foods

Compass Group PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Compass Group PLC are ranked lower than 5 (%) 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.

Jollibee Foods

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jollibee Foods are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Jollibee Foods 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 Group and Jollibee Foods

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

The idea behind Compass Group PLC and Jollibee Foods 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.