Correlation Between Compass Diversified and Teijin

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

Diversification Opportunities for Compass Diversified and Teijin

-0.27

Correlation Coefficient

Compass Diversified  Teijin

Very good diversification

The 3 months correlation between Compass and Teijin is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified Holdings and Teijin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teijin 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 Teijin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teijin has no effect on the direction of Compass Diversified i.e., Compass Diversified and Teijin go up and down completely randomly.

Pair Corralation between Compass Diversified and Teijin

Given the investment horizon of 90 days Compass Diversified Holdings is expected to under-perform the Teijin. In addition to that, Compass Diversified is 1.36 times more volatile than Teijin. It trades about -0.16 of its total potential returns per unit of risk. Teijin is currently generating about 0.1 per unit of volatility. If you would invest  847.00  in Teijin on December 29, 2024 and sell it today you would earn a total of  64.00  from holding Teijin or generate 7.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Compass Diversified Holdings  vs.  Teijin

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.

Teijin

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Teijin are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Teijin may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Compass Diversified and Teijin

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

The idea behind Compass Diversified Holdings and Teijin 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.