Correlation Between Compass Diversified and NH Foods

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

Diversification Opportunities for Compass Diversified and NH Foods

0.0

Correlation Coefficient

Compass Diversified  NH Foods

Pay attention - limited upside

The 3 months correlation between Compass and NIPMY is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified Holdings and NH Foods Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NH Foods 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 NH Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NH Foods has no effect on the direction of Compass Diversified i.e., Compass Diversified and NH Foods go up and down completely randomly.

Pair Corralation between Compass Diversified and NH Foods

Assuming the 90 days trading horizon Compass Diversified Holdings is expected to under-perform the NH Foods. In addition to that, Compass Diversified is 2.06 times more volatile than NH Foods Ltd. It trades about 0.0 of its total potential returns per unit of risk. NH Foods Ltd is currently generating about 0.09 per unit of volatility. If you would invest  1,330  in NH Foods Ltd on October 11, 2024 and sell it today you would earn a total of  370.00  from holding NH Foods Ltd or generate 27.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Compass Diversified Holdings  vs.  NH Foods Ltd

Compass Diversified

Risk-Adjusted Performance

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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.

NH Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NH Foods Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, NH Foods 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 NH Foods

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

The idea behind Compass Diversified Holdings and NH Foods Ltd 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.