Correlation Between Compass Diversified and Kulicke

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

Diversification Opportunities for Compass Diversified and Kulicke

0.38

Correlation Coefficient

Compass Diversified  Kulicke

Weak diversification

The 3 months correlation between Compass and Kulicke is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified Holdings and Kulicke and Soffa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kulicke and Soffa 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 Kulicke. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kulicke and Soffa has no effect on the direction of Compass Diversified i.e., Compass Diversified and Kulicke go up and down completely randomly.

Pair Corralation between Compass Diversified and Kulicke

Assuming the 90 days trading horizon Compass Diversified Holdings is expected to generate 0.54 times more return on investment than Kulicke. However, Compass Diversified Holdings is 1.86 times less risky than Kulicke. It trades about -0.02 of its potential returns per unit of risk. Kulicke and Soffa is currently generating about -0.22 per unit of risk. If you would invest  2,270  in Compass Diversified Holdings on December 22, 2024 and sell it today you would lose (40.00) from holding Compass Diversified Holdings or give up 1.76% of portfolio value over 90 days.

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

Compass Diversified Holdings  vs.  Kulicke and Soffa

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Kulicke and Soffa

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kulicke and Soffa has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Compass Diversified and Kulicke

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

The idea behind Compass Diversified Holdings and Kulicke and Soffa 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.