Correlation Between Compass Diversified and Ayala

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

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

Diversification Opportunities for Compass Diversified and Ayala

0.26

Correlation Coefficient

Compass Diversified  Ayala

Modest diversification

The 3 months correlation between Compass and Ayala is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified Holdings and Ayala in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ayala 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 Holdings are associated (or correlated) with Ayala. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ayala has no effect on the direction of Compass Diversified i.e., Compass Diversified and Ayala go up and down completely randomly.

Pair Corralation between Compass Diversified and Ayala

Given the investment horizon of 90 days Compass Diversified Holdings is expected to generate 0.94 times more return on investment than Ayala. However, Compass Diversified Holdings is 1.06 times less risky than Ayala. It trades about 0.05 of its potential returns per unit of risk. Ayala is currently generating about 0.0 per unit of risk. If you would invest  1,642  in Compass Diversified Holdings on September 3, 2024 and sell it today you would earn a total of  728.00  from holding Compass Diversified Holdings or generate 44.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	78.38%
Values	Daily Returns

Compass Diversified Holdings  vs.  Ayala

Compass Diversified

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compass Diversified Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal fundamental indicators, Compass Diversified may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ayala

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ayala are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain essential indicators, Ayala reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compass Diversified and Ayala

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

The idea behind Compass Diversified Holdings and Ayala 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 CEOs Directory module to screen CEOs from public companies around the world.