Correlation Between Compass Group and MTY Food

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

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

Diversification Opportunities for Compass Group and MTY Food

0.74

Correlation Coefficient

Compass Group  MTY Food

Poor diversification

The 3 months correlation between Compass and MTY is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Compass Group PLC and MTY Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTY Food Group and Compass 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 Compass Group PLC are associated (or correlated) with MTY Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTY Food Group has no effect on the direction of Compass Group i.e., Compass Group and MTY Food go up and down completely randomly.

Pair Corralation between Compass Group and MTY Food

Assuming the 90 days trading horizon Compass Group PLC is expected to generate 0.96 times more return on investment than MTY Food. However, Compass Group PLC is 1.04 times less risky than MTY Food. It trades about 0.09 of its potential returns per unit of risk. MTY Food Group is currently generating about 0.05 per unit of risk. If you would invest  3,079  in Compass Group PLC on October 6, 2024 and sell it today you would earn a total of  145.00  from holding Compass Group PLC or generate 4.71% return on investment over 90 days.

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

Compass Group PLC  vs.  MTY Food Group

Compass Group PLC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Compass Group PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Compass Group reported solid returns over the last few months and may actually be approaching a breakup point.

MTY Food Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MTY Food Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, MTY Food is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Compass Group and MTY Food

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

The idea behind Compass Group PLC and MTY Food Group 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.