Correlation Between Graphic Packaging and Compass Digital

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

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

Diversification Opportunities for Graphic Packaging and Compass Digital

-0.26

Correlation Coefficient

Graphic Packaging  Compass Digital

Very good diversification

The 3 months correlation between Graphic and Compass is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Graphic Packaging Holding and Compass Digital Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Digital Acqu and Graphic Packaging 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 Graphic Packaging Holding are associated (or correlated) with Compass Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Digital Acqu has no effect on the direction of Graphic Packaging i.e., Graphic Packaging and Compass Digital go up and down completely randomly.

Pair Corralation between Graphic Packaging and Compass Digital

Considering the 90-day investment horizon Graphic Packaging Holding is expected to under-perform the Compass Digital. In addition to that, Graphic Packaging is 13.21 times more volatile than Compass Digital Acquisition. It trades about -0.1 of its total potential returns per unit of risk. Compass Digital Acquisition is currently generating about 0.22 per unit of volatility. If you would invest  1,073  in Compass Digital Acquisition on March 12, 2024 and sell it today you would earn a total of  6.00  from holding Compass Digital Acquisition or generate 0.56% return on investment over 90 days.

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

Graphic Packaging Holding  vs.  Compass Digital Acquisition

Graphic Packaging Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Graphic Packaging Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Graphic Packaging is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Compass Digital Acqu

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Compass Digital Acquisition are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Compass Digital is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Graphic Packaging and Compass Digital

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

The idea behind Graphic Packaging Holding and Compass Digital Acquisition 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.