Correlation Between Mammoth Energy and Compass Diversified

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

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

Diversification Opportunities for Mammoth Energy and Compass Diversified

-0.49

Correlation Coefficient

Mammoth Energy  Compass Diversified

Very good diversification

The 3 months correlation between Mammoth and Compass is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Mammoth Energy Services and Compass Diversified Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Diversified and Mammoth Energy 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 Mammoth Energy Services 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 Mammoth Energy i.e., Mammoth Energy and Compass Diversified go up and down completely randomly.

Pair Corralation between Mammoth Energy and Compass Diversified

Given the investment horizon of 90 days Mammoth Energy is expected to generate 216.78 times less return on investment than Compass Diversified. In addition to that, Mammoth Energy is 2.11 times more volatile than Compass Diversified Holdings. It trades about 0.0 of its total potential returns per unit of risk. Compass Diversified Holdings is currently generating about 0.12 per unit of volatility. If you would invest  2,110  in Compass Diversified Holdings on September 2, 2024 and sell it today you would earn a total of  260.00  from holding Compass Diversified Holdings or generate 12.32% return on investment over 90 days.

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

Mammoth Energy Services  vs.  Compass Diversified Holdings

Mammoth Energy Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mammoth Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Mammoth Energy is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Compass Diversified

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compass Diversified Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal fundamental indicators, Compass Diversified may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Mammoth Energy and Compass Diversified

The main advantage of trading using opposite Mammoth Energy and Compass Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mammoth Energy 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 Mammoth Energy Services and Compass Diversified Holdings 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.