Correlation Between Ferroglobe PLC and Compass Minerals

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

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

Diversification Opportunities for Ferroglobe PLC and Compass Minerals

0.79

Correlation Coefficient

Ferroglobe PLC  Compass Minerals

Poor diversification

The 3 months correlation between Ferroglobe and Compass is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Ferroglobe PLC and Compass Minerals International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Minerals Int and Ferroglobe PLC 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 Ferroglobe PLC are associated (or correlated) with Compass Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Minerals Int has no effect on the direction of Ferroglobe PLC i.e., Ferroglobe PLC and Compass Minerals go up and down completely randomly.

Pair Corralation between Ferroglobe PLC and Compass Minerals

Considering the 90-day investment horizon Ferroglobe PLC is expected to generate 0.59 times more return on investment than Compass Minerals. However, Ferroglobe PLC is 1.7 times less risky than Compass Minerals. It trades about -0.03 of its potential returns per unit of risk. Compass Minerals International is currently generating about -0.05 per unit of risk. If you would invest  449.00  in Ferroglobe PLC on December 2, 2024 and sell it today you would lose (106.00) from holding Ferroglobe PLC or give up 23.61% of portfolio value over 90 days.

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

Ferroglobe PLC  vs.  Compass Minerals International

Ferroglobe PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ferroglobe PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Compass Minerals Int

Risk-Adjusted Performance

Very Weak

Over the last 90 days Compass Minerals International has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's primary 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.

Pair Trading with Ferroglobe PLC and Compass Minerals

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

The idea behind Ferroglobe PLC and Compass Minerals International 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.