Correlation Between Tejon Ranch and Compass Diversified

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

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

Diversification Opportunities for Tejon Ranch and Compass Diversified

-0.15

Correlation Coefficient

Tejon Ranch  Compass Diversified

Good diversification

The 3 months correlation between Tejon and Compass is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Tejon Ranch Co and Compass Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Diversified and Tejon Ranch 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 Tejon Ranch Co 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 Tejon Ranch i.e., Tejon Ranch and Compass Diversified go up and down completely randomly.

Pair Corralation between Tejon Ranch and Compass Diversified

Considering the 90-day investment horizon Tejon Ranch Co is expected to generate 1.53 times more return on investment than Compass Diversified. However, Tejon Ranch is 1.53 times more volatile than Compass Diversified. It trades about 0.02 of its potential returns per unit of risk. Compass Diversified is currently generating about -0.02 per unit of risk. If you would invest  1,582  in Tejon Ranch Co on December 29, 2024 and sell it today you would earn a total of  26.00  from holding Tejon Ranch Co or generate 1.64% return on investment over 90 days.

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

Tejon Ranch Co  vs.  Compass Diversified

Tejon Ranch

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tejon Ranch Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Tejon Ranch is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Compass Diversified

Risk-Adjusted Performance

Very Weak

Over the last 90 days Compass Diversified 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 Tejon Ranch and Compass Diversified

The main advantage of trading using opposite Tejon Ranch and Compass Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tejon Ranch 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 Tejon Ranch Co and Compass Diversified 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.