Correlation Between Compass and Trade Desk

Can any of the company-specific risk be diversified away by investing in both Compass and Trade Desk 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 and Trade Desk into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Compass and Trade Desk, you can compare the effects of market volatilities on Compass and Trade Desk 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 with a short position of Trade Desk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass and Trade Desk.

Diversification Opportunities for Compass and Trade Desk

-0.87

Correlation Coefficient

Compass  Trade Desk

Pay attention - limited upside

The 3 months correlation between Compass and Trade is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Compass and Trade Desk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trade Desk and Compass 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 are associated (or correlated) with Trade Desk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trade Desk has no effect on the direction of Compass i.e., Compass and Trade Desk go up and down completely randomly.

Pair Corralation between Compass and Trade Desk

Given the investment horizon of 90 days Compass is expected to generate 0.98 times more return on investment than Trade Desk. However, Compass is 1.02 times less risky than Trade Desk. It trades about 0.18 of its potential returns per unit of risk. Trade Desk is currently generating about -0.21 per unit of risk. If you would invest  579.00  in Compass on December 28, 2024 and sell it today you would earn a total of  355.00  from holding Compass or generate 61.31% return on investment over 90 days.

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

Compass  vs.  Trade Desk

Compass

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Compass are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady primary indicators, Compass reported solid returns over the last few months and may actually be approaching a breakup point.

Trade Desk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Trade Desk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Compass and Trade Desk

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

The idea behind Compass and Trade Desk 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.