Correlation Between Compass Diversified and Gauzy

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

Diversification Opportunities for Compass Diversified and Gauzy

0.49

Correlation Coefficient

Compass Diversified  Gauzy

Very weak diversification

The 3 months correlation between Compass and Gauzy is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified Holdings and Gauzy Ltd Ordinary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gauzy Ordinary 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 Gauzy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gauzy Ordinary has no effect on the direction of Compass Diversified i.e., Compass Diversified and Gauzy go up and down completely randomly.

Pair Corralation between Compass Diversified and Gauzy

Assuming the 90 days trading horizon Compass Diversified Holdings is expected to under-perform the Gauzy. But the preferred stock apears to be less risky and, when comparing its historical volatility, Compass Diversified Holdings is 5.01 times less risky than Gauzy. The preferred stock trades about -0.03 of its potential returns per unit of risk. The Gauzy Ltd Ordinary is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  968.00  in Gauzy Ltd Ordinary on December 21, 2024 and sell it today you would lose (44.00) from holding Gauzy Ltd Ordinary or give up 4.55% 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.  Gauzy Ltd Ordinary

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.

Gauzy Ordinary

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gauzy Ltd Ordinary has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Gauzy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Compass Diversified and Gauzy

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

The idea behind Compass Diversified Holdings and Gauzy Ltd Ordinary 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.