Correlation Between Compass Diversified and Agape ATP

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

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

Diversification Opportunities for Compass Diversified and Agape ATP

0.51

Correlation Coefficient

Compass Diversified  Agape ATP

Very weak diversification

The 3 months correlation between Compass and Agape is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified Holdings and Agape ATP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agape ATP and Compass Diversified 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 Diversified Holdings are associated (or correlated) with Agape ATP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agape ATP has no effect on the direction of Compass Diversified i.e., Compass Diversified and Agape ATP go up and down completely randomly.

Pair Corralation between Compass Diversified and Agape ATP

Assuming the 90 days trading horizon Compass Diversified Holdings is expected to under-perform the Agape ATP. But the preferred stock apears to be less risky and, when comparing its historical volatility, Compass Diversified Holdings is 12.8 times less risky than Agape ATP. The preferred stock trades about -0.03 of its potential returns per unit of risk. The Agape ATP is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  145.00  in Agape ATP on December 20, 2024 and sell it today you would lose (43.00) from holding Agape ATP or give up 29.66% of portfolio value over 90 days.

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

Compass Diversified Holdings  vs.  Agape ATP

Compass Diversified

Risk-Adjusted Performance

Very Weak

Over the last 90 days Compass Diversified Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Compass Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Agape ATP

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Agape ATP are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Agape ATP exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compass Diversified and Agape ATP

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

The idea behind Compass Diversified Holdings and Agape ATP 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.