Correlation Between FTAI Infrastructure and Compass Diversified

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

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

Diversification Opportunities for FTAI Infrastructure and Compass Diversified

0.76

Correlation Coefficient

FTAI Infrastructure  Compass Diversified

Poor diversification

The 3 months correlation between FTAI and Compass is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding FTAI Infrastructure and Compass Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Diversified and FTAI Infrastructure 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 FTAI Infrastructure 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 FTAI Infrastructure i.e., FTAI Infrastructure and Compass Diversified go up and down completely randomly.

Pair Corralation between FTAI Infrastructure and Compass Diversified

Considering the 90-day investment horizon FTAI Infrastructure is expected to under-perform the Compass Diversified. In addition to that, FTAI Infrastructure is 4.66 times more volatile than Compass Diversified. It trades about -0.16 of its total potential returns per unit of risk. Compass Diversified is currently generating about -0.06 per unit of volatility. If you would invest  2,351  in Compass Diversified on December 29, 2024 and sell it today you would lose (77.00) from holding Compass Diversified or give up 3.28% of portfolio value over 90 days.

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

FTAI Infrastructure  vs.  Compass Diversified

FTAI Infrastructure

Risk-Adjusted Performance

Very Weak

Over the last 90 days FTAI Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's forward indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

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 FTAI Infrastructure and Compass Diversified

The main advantage of trading using opposite FTAI Infrastructure and Compass Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FTAI Infrastructure 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 FTAI Infrastructure 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.