Correlation Between Compass Diversified and FTAI Infrastructure

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

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

Diversification Opportunities for Compass Diversified and FTAI Infrastructure

0.76

Correlation Coefficient

Compass Diversified  FTAI Infrastructure

Poor diversification

The 3 months correlation between Compass and FTAI is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified and FTAI Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTAI Infrastructure 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 FTAI Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTAI Infrastructure has no effect on the direction of Compass Diversified i.e., Compass Diversified and FTAI Infrastructure go up and down completely randomly.

Pair Corralation between Compass Diversified and FTAI Infrastructure

Assuming the 90 days trading horizon Compass Diversified is expected to generate 0.21 times more return on investment than FTAI Infrastructure. However, Compass Diversified is 4.66 times less risky than FTAI Infrastructure. It trades about -0.06 of its potential returns per unit of risk. FTAI Infrastructure is currently generating about -0.16 per unit of risk. If you would invest  2,351  in Compass Diversified on December 29, 2024 and sell it today you would lose (77.00) from holding Compass Diversified or give up 3.28% of portfolio value over 90 days.

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

Compass Diversified  vs.  FTAI Infrastructure

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. In spite of rather sound fundamental indicators, Compass Diversified is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

FTAI Infrastructure

Risk-Adjusted Performance

Very Weak

Over the last 90 days FTAI Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's forward indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Compass Diversified and FTAI Infrastructure

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

The idea behind Compass Diversified and FTAI Infrastructure 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.