Correlation Between Compass Diversified and Seaboard

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

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

Diversification Opportunities for Compass Diversified and Seaboard

0.57

Correlation Coefficient

Compass Diversified  Seaboard

Very weak diversification

The 3 months correlation between Compass and Seaboard is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified and Seaboard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seaboard and Compass Diversified 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 Diversified are associated (or correlated) with Seaboard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seaboard has no effect on the direction of Compass Diversified i.e., Compass Diversified and Seaboard go up and down completely randomly.

Pair Corralation between Compass Diversified and Seaboard

Assuming the 90 days trading horizon Compass Diversified is expected to generate 0.26 times more return on investment than Seaboard. However, Compass Diversified is 3.91 times less risky than Seaboard. It trades about 0.05 of its potential returns per unit of risk. Seaboard is currently generating about -0.28 per unit of risk. If you would invest  2,358  in Compass Diversified on September 28, 2024 and sell it today you would earn a total of  9.00  from holding Compass Diversified or generate 0.38% return on investment over 90 days.

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

Compass Diversified  vs.  Seaboard

Compass Diversified

Risk-Adjusted Performance

0 of 100

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 fundamental drivers, Compass Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Seaboard

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seaboard has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Compass Diversified and Seaboard

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

The idea behind Compass Diversified and Seaboard 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.