Correlation Between Compass Diversified and RCM Technologies
Can any of the company-specific risk be diversified away by investing in both Compass Diversified and RCM Technologies 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 Diversified and RCM Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compass Diversified Holdings and RCM Technologies, you can compare the effects of market volatilities on Compass Diversified and RCM Technologies 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 Diversified with a short position of RCM Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Diversified and RCM Technologies.
Diversification Opportunities for Compass Diversified and RCM Technologies
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Compass and RCM is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified Holdings and RCM Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCM Technologies and Compass Diversified 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 Diversified Holdings are associated (or correlated) with RCM Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCM Technologies has no effect on the direction of Compass Diversified i.e., Compass Diversified and RCM Technologies go up and down completely randomly.
Pair Corralation between Compass Diversified and RCM Technologies
Given the investment horizon of 90 days Compass Diversified Holdings is expected to under-perform the RCM Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Compass Diversified Holdings is 1.34 times less risky than RCM Technologies. The stock trades about -0.01 of its potential returns per unit of risk. The RCM Technologies is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,864 in RCM Technologies on June 16, 2024 and sell it today you would earn a total of 100.00 from holding RCM Technologies or generate 5.36% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Compass Diversified Holdings vs. RCM Technologies
Performance |
Timeline |
Compass Diversified |
RCM Technologies |
Compass Diversified and RCM Technologies Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Compass Diversified and RCM Technologies
The main advantage of trading using opposite Compass Diversified and RCM Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compass Diversified position performs unexpectedly, RCM Technologies 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 RCM Technologies will offset losses from the drop in RCM Technologies' long position.Compass Diversified vs. Matthews International | Compass Diversified vs. Steel Partners Holdings | Compass Diversified vs. Valmont Industries | Compass Diversified vs. Brookfield Business Partners |
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Check out your portfolio center.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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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