Correlation Between Compass Diversified and FTAI Infrastructure

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

Diversification Opportunities for Compass Diversified and FTAI Infrastructure

-0.07

Correlation Coefficient

Compass Diversified  FTAI Infrastructure

Good diversification

The 3 months correlation between Compass and FTAI is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified Holdings and FTAI Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTAI Infrastructure 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 FTAI Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTAI Infrastructure has no effect on the direction of Compass Diversified i.e., Compass Diversified and FTAI Infrastructure go up and down completely randomly.

Pair Corralation between Compass Diversified and FTAI Infrastructure

Given the investment horizon of 90 days Compass Diversified is expected to generate 4.44 times less return on investment than FTAI Infrastructure. But when comparing it to its historical volatility, Compass Diversified Holdings is 1.73 times less risky than FTAI Infrastructure. It trades about 0.05 of its potential returns per unit of risk. FTAI Infrastructure is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  367.00  in FTAI Infrastructure on September 2, 2024 and sell it today you would earn a total of  498.00  from holding FTAI Infrastructure or generate 135.69% 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.  FTAI Infrastructure

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.

FTAI Infrastructure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FTAI Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, FTAI Infrastructure is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Compass Diversified and FTAI Infrastructure

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

The idea behind Compass Diversified Holdings and FTAI Infrastructure 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.