Correlation Between Sphere Entertainment and CompoSecure

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

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

Diversification Opportunities for Sphere Entertainment and CompoSecure

-0.65

Correlation Coefficient

Sphere Entertainment  CompoSecure

Excellent diversification

The 3 months correlation between Sphere and CompoSecure is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Sphere Entertainment Co and CompoSecure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CompoSecure and Sphere Entertainment 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 Sphere Entertainment Co are associated (or correlated) with CompoSecure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CompoSecure has no effect on the direction of Sphere Entertainment i.e., Sphere Entertainment and CompoSecure go up and down completely randomly.

Pair Corralation between Sphere Entertainment and CompoSecure

Given the investment horizon of 90 days Sphere Entertainment is expected to generate 39.52 times less return on investment than CompoSecure. But when comparing it to its historical volatility, Sphere Entertainment Co is 25.18 times less risky than CompoSecure. It trades about 0.05 of its potential returns per unit of risk. CompoSecure is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  65.00  in CompoSecure on October 4, 2024 and sell it today you would earn a total of  400.00  from holding CompoSecure or generate 615.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	89.11%
Values	Daily Returns

Sphere Entertainment Co  vs.  CompoSecure

Sphere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's technical indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

CompoSecure

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CompoSecure are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, CompoSecure showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sphere Entertainment and CompoSecure

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

The idea behind Sphere Entertainment Co and CompoSecure 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.