Correlation Between Largo Physical and Compass Minerals

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

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

Diversification Opportunities for Largo Physical and Compass Minerals

-0.83

Correlation Coefficient

Largo Physical  Compass Minerals

Pay attention - limited upside

The 3 months correlation between Largo and Compass is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Largo Physical Vanadium and Compass Minerals International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Minerals Int and Largo Physical 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 Largo Physical Vanadium are associated (or correlated) with Compass Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Minerals Int has no effect on the direction of Largo Physical i.e., Largo Physical and Compass Minerals go up and down completely randomly.

Pair Corralation between Largo Physical and Compass Minerals

If you would invest  1,263  in Compass Minerals International on September 4, 2024 and sell it today you would earn a total of  214.00  from holding Compass Minerals International or generate 16.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Largo Physical Vanadium  vs.  Compass Minerals International

Largo Physical Vanadium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Largo Physical Vanadium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Largo Physical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Compass Minerals Int

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Compass Minerals International are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady primary indicators, Compass Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Largo Physical and Compass Minerals

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

The idea behind Largo Physical Vanadium and Compass Minerals International 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.