Correlation Between Biofil Chemicals and Compass Diversified

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

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

Diversification Opportunities for Biofil Chemicals and Compass Diversified

-0.48

Correlation Coefficient

Biofil Chemicals  Compass Diversified

Very good diversification

The 3 months correlation between Biofil and Compass is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Biofil Chemicals Pharmaceutica and Compass Diversified Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Diversified and Biofil Chemicals 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 Biofil Chemicals Pharmaceuticals are associated (or correlated) with Compass Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Diversified has no effect on the direction of Biofil Chemicals i.e., Biofil Chemicals and Compass Diversified go up and down completely randomly.

Pair Corralation between Biofil Chemicals and Compass Diversified

Assuming the 90 days trading horizon Biofil Chemicals Pharmaceuticals is expected to generate 1.7 times more return on investment than Compass Diversified. However, Biofil Chemicals is 1.7 times more volatile than Compass Diversified Holdings. It trades about 0.02 of its potential returns per unit of risk. Compass Diversified Holdings is currently generating about 0.02 per unit of risk. If you would invest  5,865  in Biofil Chemicals Pharmaceuticals on February 7, 2024 and sell it today you would earn a total of  890.00  from holding Biofil Chemicals Pharmaceuticals or generate 15.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.38%
Values	Daily Returns

Biofil Chemicals Pharmaceutica  vs.  Compass Diversified Holdings

Biofil Chemicals Pha

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Biofil Chemicals Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Biofil Chemicals is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Compass Diversified

Risk-Adjusted Performance

3 of 100

Weak

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

Pair Trading with Biofil Chemicals and Compass Diversified

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

The idea behind Biofil Chemicals Pharmaceuticals and Compass Diversified Holdings 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 CEOs Directory module to screen CEOs from public companies around the world.