Correlation Between Compass Diversified and GreenPro Capital

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

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

Diversification Opportunities for Compass Diversified and GreenPro Capital

-0.58

Correlation Coefficient

Compass Diversified  GreenPro Capital

Excellent diversification

The 3 months correlation between Compass and GreenPro is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified and GreenPro Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenPro Capital Corp 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 GreenPro Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GreenPro Capital Corp has no effect on the direction of Compass Diversified i.e., Compass Diversified and GreenPro Capital go up and down completely randomly.

Pair Corralation between Compass Diversified and GreenPro Capital

Assuming the 90 days trading horizon Compass Diversified is expected to generate 0.06 times more return on investment than GreenPro Capital. However, Compass Diversified is 17.28 times less risky than GreenPro Capital. It trades about -0.46 of its potential returns per unit of risk. GreenPro Capital Corp is currently generating about -0.18 per unit of risk. If you would invest  2,395  in Compass Diversified on September 22, 2024 and sell it today you would lose (67.00) from holding Compass Diversified or give up 2.8% of portfolio value over 90 days.

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

Compass Diversified  vs.  GreenPro Capital Corp

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. 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.

GreenPro Capital Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GreenPro Capital Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, GreenPro Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compass Diversified and GreenPro Capital

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

The idea behind Compass Diversified and GreenPro Capital Corp 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.