Correlation Between Compass Group and MUSCLE MAKER

Can any of the company-specific risk be diversified away by investing in both Compass Group and MUSCLE MAKER 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 MUSCLE MAKER 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 MUSCLE MAKER DL 0001, you can compare the effects of market volatilities on Compass Group and MUSCLE MAKER 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 MUSCLE MAKER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Group and MUSCLE MAKER.

Diversification Opportunities for Compass Group and MUSCLE MAKER

-0.67

Correlation Coefficient

Compass Group  MUSCLE MAKER

Excellent diversification

The 3 months correlation between Compass and MUSCLE is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Compass Group PLC and MUSCLE MAKER DL 0001 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MUSCLE MAKER DL 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 MUSCLE MAKER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MUSCLE MAKER DL has no effect on the direction of Compass Group i.e., Compass Group and MUSCLE MAKER go up and down completely randomly.

Pair Corralation between Compass Group and MUSCLE MAKER

Assuming the 90 days trading horizon Compass Group PLC is expected to generate 0.44 times more return on investment than MUSCLE MAKER. However, Compass Group PLC is 2.26 times less risky than MUSCLE MAKER. It trades about 0.12 of its potential returns per unit of risk. MUSCLE MAKER DL 0001 is currently generating about -0.02 per unit of risk. If you would invest  2,900  in Compass Group PLC on September 23, 2024 and sell it today you would earn a total of  308.00  from holding Compass Group PLC or generate 10.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.97%
Values	Daily Returns

Compass Group PLC  vs.  MUSCLE MAKER DL 0001

Compass Group PLC

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compass Group PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Compass Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

MUSCLE MAKER DL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MUSCLE MAKER DL 0001 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, MUSCLE MAKER is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Compass Group and MUSCLE MAKER

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

The idea behind Compass Group PLC and MUSCLE MAKER DL 0001 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.