Correlation Between One Group and Compass Group

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

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

Diversification Opportunities for One Group and Compass Group

-0.33

Correlation Coefficient

One Group  Compass Group

Very good diversification

The 3 months correlation between One and Compass is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding One Group Hospitality 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 One Group 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 One Group Hospitality 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 One Group i.e., One Group and Compass Group go up and down completely randomly.

Pair Corralation between One Group and Compass Group

Given the investment horizon of 90 days One Group Hospitality is expected to under-perform the Compass Group. In addition to that, One Group is 3.49 times more volatile than Compass Group PLC. It trades about -0.05 of its total potential returns per unit of risk. Compass Group PLC is currently generating about 0.09 per unit of volatility. If you would invest  2,261  in Compass Group PLC on October 6, 2024 and sell it today you would earn a total of  1,099  from holding Compass Group PLC or generate 48.61% return on investment over 90 days.

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

One Group Hospitality  vs.  Compass Group PLC

One Group Hospitality

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days One Group Hospitality 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 forward-looking signals remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Compass Group PLC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Compass Group PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. 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 One Group and Compass Group

The main advantage of trading using opposite One Group and Compass Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if One Group 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 One Group Hospitality 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.