Correlation Between Trade Desk and Compass

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

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

Diversification Opportunities for Trade Desk and Compass

0.62

Correlation Coefficient

Trade Desk  Compass

Poor diversification

The 3 months correlation between Trade and Compass is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Trade Desk and Compass in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass and Trade Desk 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 Trade Desk are associated (or correlated) with Compass. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass has no effect on the direction of Trade Desk i.e., Trade Desk and Compass go up and down completely randomly.

Pair Corralation between Trade Desk and Compass

Considering the 90-day investment horizon Trade Desk is expected to generate 1.19 times more return on investment than Compass. However, Trade Desk is 1.19 times more volatile than Compass. It trades about 0.06 of its potential returns per unit of risk. Compass is currently generating about 0.05 per unit of risk. If you would invest  12,934  in Trade Desk on September 12, 2024 and sell it today you would earn a total of  332.00  from holding Trade Desk or generate 2.57% return on investment over 90 days.

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

Trade Desk  vs.  Compass

Trade Desk

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Trade Desk are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Trade Desk exhibited solid returns over the last few months and may actually be approaching a breakup point.

Compass

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Compass are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady primary indicators, Compass reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Trade Desk and Compass

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

The idea behind Trade Desk and Compass 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.