Correlation Between Gauzy and Compass Diversified

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

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

Diversification Opportunities for Gauzy and Compass Diversified

0.49

Correlation Coefficient

Gauzy  Compass Diversified

Very weak diversification

The 3 months correlation between Gauzy and Compass is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Gauzy Ltd Ordinary and Compass Diversified Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Diversified and Gauzy 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 Gauzy Ltd Ordinary 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 Gauzy i.e., Gauzy and Compass Diversified go up and down completely randomly.

Pair Corralation between Gauzy and Compass Diversified

Given the investment horizon of 90 days Gauzy Ltd Ordinary is expected to generate 5.01 times more return on investment than Compass Diversified. However, Gauzy is 5.01 times more volatile than Compass Diversified Holdings. It trades about 0.01 of its potential returns per unit of risk. Compass Diversified Holdings is currently generating about -0.03 per unit of risk. If you would invest  968.00  in Gauzy Ltd Ordinary on December 21, 2024 and sell it today you would lose (44.00) from holding Gauzy Ltd Ordinary or give up 4.55% of portfolio value over 90 days.

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

Gauzy Ltd Ordinary  vs.  Compass Diversified Holdings

Gauzy Ordinary

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gauzy Ltd Ordinary has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Gauzy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Compass Diversified

Risk-Adjusted Performance

Very Weak

Over the last 90 days Compass Diversified Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Compass Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gauzy and Compass Diversified

The main advantage of trading using opposite Gauzy and Compass Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gauzy 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 Gauzy Ltd Ordinary and Compass Diversified Holdings 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.