Correlation Between Compass Diversified and SBC Medical

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

By analyzing existing cross correlation between Compass Diversified and SBC Medical Group, you can compare the effects of market volatilities on Compass Diversified and SBC Medical 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 SBC Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Diversified and SBC Medical.

Diversification Opportunities for Compass Diversified and SBC Medical

-0.49

Correlation Coefficient

Compass Diversified  SBC Medical

Very good diversification

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

Pair Corralation between Compass Diversified and SBC Medical

Assuming the 90 days trading horizon Compass Diversified is expected to under-perform the SBC Medical. But the preferred stock apears to be less risky and, when comparing its historical volatility, Compass Diversified is 8.35 times less risky than SBC Medical. The preferred stock trades about -0.08 of its potential returns per unit of risk. The SBC Medical Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  26.00  in SBC Medical Group on September 21, 2024 and sell it today you would earn a total of  1.00  from holding SBC Medical Group or generate 3.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Compass Diversified  vs.  SBC Medical Group

Compass Diversified

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compass Diversified 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.

SBC Medical Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SBC Medical Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SBC Medical showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compass Diversified and SBC Medical

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

The idea behind Compass Diversified and SBC Medical Group 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.