Correlation Between Noble Romans and Compass Group

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

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

Diversification Opportunities for Noble Romans and Compass Group

-0.23

Correlation Coefficient

Noble Romans  Compass Group

Very good diversification

The 3 months correlation between Noble and Compass is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Noble Romans and Compass Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Group PLC and Noble Romans 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 Noble Romans are associated (or correlated) with Compass Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Group PLC has no effect on the direction of Noble Romans i.e., Noble Romans and Compass Group go up and down completely randomly.

Pair Corralation between Noble Romans and Compass Group

Given the investment horizon of 90 days Noble Romans is expected to generate 9.85 times more return on investment than Compass Group. However, Noble Romans is 9.85 times more volatile than Compass Group PLC. It trades about 0.07 of its potential returns per unit of risk. Compass Group PLC is currently generating about -0.03 per unit of risk. If you would invest  36.00  in Noble Romans on October 21, 2024 and sell it today you would earn a total of  4.00  from holding Noble Romans or generate 11.11% return on investment over 90 days.

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

Noble Romans  vs.  Compass Group PLC

Noble Romans

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Noble Romans are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Noble Romans displayed solid returns over the last few months and may actually be approaching a breakup point.

Compass Group PLC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Noble Romans and Compass Group

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

The idea behind Noble Romans and Compass Group PLC 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.