Correlation Between Compass Diversified and Steel Partners
Can any of the company-specific risk be diversified away by investing in both Compass Diversified and Steel Partners 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 Steel Partners into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compass Diversified and Steel Partners Holdings, you can compare the effects of market volatilities on Compass Diversified and Steel Partners 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 Steel Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Diversified and Steel Partners.
Diversification Opportunities for Compass Diversified and Steel Partners
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Compass and Steel is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified and Steel Partners Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Partners Holdings 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 are associated (or correlated) with Steel Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steel Partners Holdings has no effect on the direction of Compass Diversified i.e., Compass Diversified and Steel Partners go up and down completely randomly.
Pair Corralation between Compass Diversified and Steel Partners
Assuming the 90 days trading horizon Compass Diversified is expected to generate 1.12 times more return on investment than Steel Partners. However, Compass Diversified is 1.12 times more volatile than Steel Partners Holdings. It trades about -0.04 of its potential returns per unit of risk. Steel Partners Holdings is currently generating about -0.06 per unit of risk. If you would invest 2,198 in Compass Diversified on March 21, 2025 and sell it today you would lose (389.00) from holding Compass Diversified or give up 17.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 51.61% |
| Values | Daily Returns |
Compass Diversified vs. Steel Partners Holdings
Performance |
| Timeline |
| Compass Diversified |
| Steel Partners Holdings |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
Compass Diversified and Steel Partners Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compass Diversified and Steel Partners
The main advantage of trading using opposite Compass Diversified and Steel Partners positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compass Diversified position performs unexpectedly, Steel Partners 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 Steel Partners will offset losses from the drop in Steel Partners' long position.| Compass Diversified vs. Compass Diversified | Compass Diversified vs. Tejon Ranch Co | Compass Diversified vs. Compass Diversified | Compass Diversified vs. Brookfield Business Partners |
| Steel Partners vs. Compass Diversified | Steel Partners vs. Compass Diversified | Steel Partners vs. Compass Diversified | Steel Partners vs. Tejon Ranch Co |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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