Correlation Between Compass Diversified and Harte Hanks

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

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

Diversification Opportunities for Compass Diversified and Harte Hanks

0.56

Correlation Coefficient

Compass Diversified  Harte Hanks

Very weak diversification

The 3 months correlation between Compass and Harte is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified and Harte Hanks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harte Hanks 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 Harte Hanks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harte Hanks has no effect on the direction of Compass Diversified i.e., Compass Diversified and Harte Hanks go up and down completely randomly.

Pair Corralation between Compass Diversified and Harte Hanks

Assuming the 90 days trading horizon Compass Diversified is expected to generate 0.22 times more return on investment than Harte Hanks. However, Compass Diversified is 4.53 times less risky than Harte Hanks. It trades about -0.07 of its potential returns per unit of risk. Harte Hanks is currently generating about -0.05 per unit of risk. If you would invest  2,331  in Compass Diversified on December 29, 2024 and sell it today you would lose (65.00) from holding Compass Diversified or give up 2.79% of portfolio value over 90 days.

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

Compass Diversified  vs.  Harte Hanks

Compass Diversified

Risk-Adjusted Performance

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 fundamental drivers, Compass Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Harte Hanks

Risk-Adjusted Performance

Very Weak

Over the last 90 days Harte Hanks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Compass Diversified and Harte Hanks

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

The idea behind Compass Diversified and Harte Hanks 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 Anywhere module to track or share privately all of your investments from the convenience of any device.