Correlation Between Compass Group and Young Cos

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

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

Diversification Opportunities for Compass Group and Young Cos

0.73

Correlation Coefficient

Compass Group  Young Cos

Poor diversification

The 3 months correlation between Compass and Young is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Compass Group PLC and Young Cos Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Young Cos Brewery and Compass Group 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 Group PLC are associated (or correlated) with Young Cos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Young Cos Brewery has no effect on the direction of Compass Group i.e., Compass Group and Young Cos go up and down completely randomly.

Pair Corralation between Compass Group and Young Cos

Assuming the 90 days trading horizon Compass Group PLC is expected to generate 0.52 times more return on investment than Young Cos. However, Compass Group PLC is 1.93 times less risky than Young Cos. It trades about 0.04 of its potential returns per unit of risk. Young Cos Brewery is currently generating about 0.0 per unit of risk. If you would invest  263,300  in Compass Group PLC on October 7, 2024 and sell it today you would earn a total of  3,100  from holding Compass Group PLC or generate 1.18% return on investment over 90 days.

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

Compass Group PLC  vs.  Young Cos Brewery

Compass Group PLC

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Compass Group PLC are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Compass Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Young Cos Brewery

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Young Cos Brewery are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Young Cos is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Compass Group and Young Cos

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

The idea behind Compass Group PLC and Young Cos Brewery 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.