Correlation Between Falcons Beyond and Compass Diversified

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

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

Diversification Opportunities for Falcons Beyond and Compass Diversified

-0.62

Correlation Coefficient

Falcons Beyond  Compass Diversified

Excellent diversification

The 3 months correlation between Falcons and Compass is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Falcons Beyond Global, and Compass Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Diversified and Falcons Beyond 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 Falcons Beyond Global, are associated (or correlated) with Compass Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Diversified has no effect on the direction of Falcons Beyond i.e., Falcons Beyond and Compass Diversified go up and down completely randomly.

Pair Corralation between Falcons Beyond and Compass Diversified

Given the investment horizon of 90 days Falcons Beyond Global, is expected to generate 9.01 times more return on investment than Compass Diversified. However, Falcons Beyond is 9.01 times more volatile than Compass Diversified. It trades about 0.05 of its potential returns per unit of risk. Compass Diversified is currently generating about -0.06 per unit of risk. If you would invest  799.00  in Falcons Beyond Global, on December 30, 2024 and sell it today you would earn a total of  42.00  from holding Falcons Beyond Global, or generate 5.26% return on investment over 90 days.

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

Falcons Beyond Global,  vs.  Compass Diversified

Falcons Beyond Global,

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Falcons Beyond Global, are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Falcons Beyond exhibited solid returns over the last few months and may actually be approaching a breakup point.

Compass Diversified

Risk-Adjusted Performance

Very Weak

Over the last 90 days Compass Diversified has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Compass Diversified is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Falcons Beyond and Compass Diversified

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

The idea behind Falcons Beyond Global, and Compass Diversified 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.