Correlation Between Compass Diversified and Marubeni

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

Diversification Opportunities for Compass Diversified and Marubeni

-0.63

Correlation Coefficient

Compass Diversified  Marubeni

Excellent diversification

The 3 months correlation between Compass and Marubeni is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified Holdings and Marubeni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marubeni 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 Marubeni. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marubeni has no effect on the direction of Compass Diversified i.e., Compass Diversified and Marubeni go up and down completely randomly.

Pair Corralation between Compass Diversified and Marubeni

Given the investment horizon of 90 days Compass Diversified Holdings is expected to under-perform the Marubeni. But the stock apears to be less risky and, when comparing its historical volatility, Compass Diversified Holdings is 1.55 times less risky than Marubeni. The stock trades about -0.16 of its potential returns per unit of risk. The Marubeni is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,470  in Marubeni on December 30, 2024 and sell it today you would earn a total of  207.00  from holding Marubeni or generate 14.08% return on investment over 90 days.

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

Compass Diversified Holdings  vs.  Marubeni

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 abnormal 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.

Marubeni

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Marubeni are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Marubeni reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compass Diversified and Marubeni

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

The idea behind Compass Diversified Holdings and Marubeni 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.

Check out your portfolio center.

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.