Correlation Between Compass Diversified and Beijing Enterprises

Can any of the company-specific risk be diversified away by investing in both Compass Diversified and Beijing Enterprises 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 Beijing Enterprises 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 Beijing Enterprises Holdings, you can compare the effects of market volatilities on Compass Diversified and Beijing Enterprises 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 Beijing Enterprises. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Diversified and Beijing Enterprises.

Diversification Opportunities for Compass Diversified and Beijing Enterprises

-0.05

Correlation Coefficient

Compass Diversified  Beijing Enterprises

Good diversification

The 3 months correlation between Compass and Beijing is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified Holdings and Beijing Enterprises Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Enterprises 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 Beijing Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Enterprises has no effect on the direction of Compass Diversified i.e., Compass Diversified and Beijing Enterprises go up and down completely randomly.

Pair Corralation between Compass Diversified and Beijing Enterprises

Given the investment horizon of 90 days Compass Diversified Holdings is expected to generate 0.65 times more return on investment than Beijing Enterprises. However, Compass Diversified Holdings is 1.53 times less risky than Beijing Enterprises. It trades about 0.19 of its potential returns per unit of risk. Beijing Enterprises Holdings is currently generating about 0.04 per unit of risk. If you would invest  2,283  in Compass Diversified Holdings on September 19, 2024 and sell it today you would earn a total of  109.00  from holding Compass Diversified Holdings or generate 4.77% return on investment over 90 days.

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

Compass Diversified Holdings  vs.  Beijing Enterprises Holdings

Compass Diversified

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compass Diversified Holdings are ranked lower than 4 (%) 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.

Beijing Enterprises

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Enterprises Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Beijing Enterprises may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Compass Diversified and Beijing Enterprises

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

The idea behind Compass Diversified Holdings and Beijing Enterprises 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.