Correlation Between Compass and DigitalBridge

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

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

Diversification Opportunities for Compass and DigitalBridge

-0.41

Correlation Coefficient

Compass  DigitalBridge

Very good diversification

The 3 months correlation between Compass and DigitalBridge is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Compass and DigitalBridge Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DigitalBridge Group and Compass 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 are associated (or correlated) with DigitalBridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DigitalBridge Group has no effect on the direction of Compass i.e., Compass and DigitalBridge go up and down completely randomly.

Pair Corralation between Compass and DigitalBridge

Given the investment horizon of 90 days Compass is expected to generate 3.97 times more return on investment than DigitalBridge. However, Compass is 3.97 times more volatile than DigitalBridge Group. It trades about 0.05 of its potential returns per unit of risk. DigitalBridge Group is currently generating about 0.04 per unit of risk. If you would invest  641.00  in Compass on September 14, 2024 and sell it today you would earn a total of  49.00  from holding Compass or generate 7.64% return on investment over 90 days.

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

Compass  vs.  DigitalBridge Group

Compass

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compass are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady primary indicators, Compass may actually be approaching a critical reversion point that can send shares even higher in January 2025.

DigitalBridge Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DigitalBridge Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, DigitalBridge is not utilizing all of its potentials. The new stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Compass and DigitalBridge

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

The idea behind Compass and DigitalBridge 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.