Correlation Between Compass Group and Good Times

Can any of the company-specific risk be diversified away by investing in both Compass Group and Good Times 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 Good Times 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 Good Times Restaurants, you can compare the effects of market volatilities on Compass Group and Good Times 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 Good Times. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Group and Good Times.

Diversification Opportunities for Compass Group and Good Times

-0.42

Correlation Coefficient

Compass Group  Good Times

Very good diversification

The 3 months correlation between Compass and Good is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Compass Group PLC and Good Times Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Good Times Restaurants 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 Good Times. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Good Times Restaurants has no effect on the direction of Compass Group i.e., Compass Group and Good Times go up and down completely randomly.

Pair Corralation between Compass Group and Good Times

Assuming the 90 days horizon Compass Group PLC is expected to generate 0.39 times more return on investment than Good Times. However, Compass Group PLC is 2.58 times less risky than Good Times. It trades about 0.12 of its potential returns per unit of risk. Good Times Restaurants is currently generating about 0.04 per unit of risk. If you would invest  2,603  in Compass Group PLC on September 12, 2024 and sell it today you would earn a total of  863.00  from holding Compass Group PLC or generate 33.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Compass Group PLC  vs.  Good Times Restaurants

Compass Group PLC

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compass Group PLC are ranked lower than 7 (%) 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.

Good Times Restaurants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Good Times Restaurants has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Good Times is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Compass Group and Good Times

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

The idea behind Compass Group PLC and Good Times Restaurants 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.