Correlation Between Compass Diversified and DMCI Holdings

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

Diversification Opportunities for Compass Diversified and DMCI Holdings

0.21

Correlation Coefficient

Compass Diversified  DMCI Holdings

Modest diversification

The 3 months correlation between Compass and DMCI is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified Holdings and DMCI Holdings ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DMCI Holdings ADR 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 DMCI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DMCI Holdings ADR has no effect on the direction of Compass Diversified i.e., Compass Diversified and DMCI Holdings go up and down completely randomly.

Pair Corralation between Compass Diversified and DMCI Holdings

Given the investment horizon of 90 days Compass Diversified Holdings is expected to generate 15.6 times more return on investment than DMCI Holdings. However, Compass Diversified is 15.6 times more volatile than DMCI Holdings ADR. It trades about 0.12 of its potential returns per unit of risk. DMCI Holdings ADR is currently generating about 0.0 per unit of risk. If you would invest  2,110  in Compass Diversified Holdings on September 3, 2024 and sell it today you would earn a total of  267.00  from holding Compass Diversified Holdings or generate 12.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	64.06%
Values	Daily Returns

Compass Diversified Holdings  vs.  DMCI Holdings ADR

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.

DMCI Holdings ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DMCI Holdings ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, DMCI Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Compass Diversified and DMCI Holdings

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

The idea behind Compass Diversified Holdings and DMCI Holdings ADR 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.