Correlation Between Compass Diversified and Jardine Matheson

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

Diversification Opportunities for Compass Diversified and Jardine Matheson

-0.44

Correlation Coefficient

Compass Diversified  Jardine Matheson

Very good diversification

The 3 months correlation between Compass and Jardine is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified Holdings and Jardine Matheson Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jardine Matheson 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 Holdings are associated (or correlated) with Jardine Matheson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jardine Matheson Holdings has no effect on the direction of Compass Diversified i.e., Compass Diversified and Jardine Matheson go up and down completely randomly.

Pair Corralation between Compass Diversified and Jardine Matheson

Given the investment horizon of 90 days Compass Diversified Holdings is expected to under-perform the Jardine Matheson. In addition to that, Compass Diversified is 1.4 times more volatile than Jardine Matheson Holdings. It trades about -0.16 of its total potential returns per unit of risk. Jardine Matheson Holdings is currently generating about 0.06 per unit of volatility. If you would invest  4,015  in Jardine Matheson Holdings on December 29, 2024 and sell it today you would earn a total of  195.00  from holding Jardine Matheson Holdings or generate 4.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Compass Diversified Holdings  vs.  Jardine Matheson Holdings

Compass Diversified

Risk-Adjusted Performance

Very Weak

Over the last 90 days Compass Diversified Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Jardine Matheson Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jardine Matheson Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Jardine Matheson 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 Jardine Matheson

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

The idea behind Compass Diversified Holdings and Jardine Matheson 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.