Correlation Between Wingstop and Compass Group

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

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

Diversification Opportunities for Wingstop and Compass Group

-0.53

Correlation Coefficient

Wingstop  Compass Group

Excellent diversification

The 3 months correlation between Wingstop and Compass is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Wingstop 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 Wingstop 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 Wingstop 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 Wingstop i.e., Wingstop and Compass Group go up and down completely randomly.

Pair Corralation between Wingstop and Compass Group

Given the investment horizon of 90 days Wingstop is expected to under-perform the Compass Group. In addition to that, Wingstop is 3.09 times more volatile than Compass Group PLC. It trades about -0.24 of its total potential returns per unit of risk. Compass Group PLC is currently generating about -0.36 per unit of volatility. If you would invest  3,494  in Compass Group PLC on October 6, 2024 and sell it today you would lose (195.00) from holding Compass Group PLC or give up 5.58% of portfolio value over 90 days.

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

Wingstop  vs.  Compass Group PLC

Wingstop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wingstop has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Compass Group PLC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compass Group PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Compass Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Wingstop and Compass Group

The main advantage of trading using opposite Wingstop and Compass Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wingstop 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 Wingstop 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.