Correlation Between Compass Diversified and PROG Holdings

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

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

Diversification Opportunities for Compass Diversified and PROG Holdings

-0.36

Correlation Coefficient

Compass Diversified  PROG Holdings

Very good diversification

The 3 months correlation between Compass and PROG is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified and PROG Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PROG Holdings 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 PROG Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PROG Holdings has no effect on the direction of Compass Diversified i.e., Compass Diversified and PROG Holdings go up and down completely randomly.

Pair Corralation between Compass Diversified and PROG Holdings

Assuming the 90 days trading horizon Compass Diversified is expected to generate 0.65 times more return on investment than PROG Holdings. However, Compass Diversified is 1.54 times less risky than PROG Holdings. It trades about 0.24 of its potential returns per unit of risk. PROG Holdings is currently generating about 0.11 per unit of risk. If you would invest  2,317  in Compass Diversified on October 22, 2024 and sell it today you would earn a total of  108.00  from holding Compass Diversified or generate 4.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Compass Diversified  vs.  PROG Holdings

Compass Diversified

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compass Diversified are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

PROG Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PROG Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Compass Diversified and PROG Holdings

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

The idea behind Compass Diversified and PROG Holdings 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.