Correlation Between Compass and MDJM

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

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

Diversification Opportunities for Compass and MDJM

-0.48

Correlation Coefficient

Compass  MDJM

Very good diversification

The 3 months correlation between Compass and MDJM is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Compass and MDJM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MDJM 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 MDJM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MDJM has no effect on the direction of Compass i.e., Compass and MDJM go up and down completely randomly.

Pair Corralation between Compass and MDJM

Given the investment horizon of 90 days Compass is expected to generate 0.6 times more return on investment than MDJM. However, Compass is 1.68 times less risky than MDJM. It trades about 0.04 of its potential returns per unit of risk. MDJM is currently generating about -0.01 per unit of risk. If you would invest  445.00  in Compass on October 27, 2024 and sell it today you would earn a total of  246.00  from holding Compass or generate 55.28% return on investment over 90 days.

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

Compass  vs.  MDJM

Compass

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compass are ranked lower than 7 (%) 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.

MDJM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MDJM has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward-looking signals remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Compass and MDJM

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

The idea behind Compass and MDJM 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..