Correlation Between Compass Group and Papa Johns
Can any of the company-specific risk be diversified away by investing in both Compass Group and Papa Johns 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 Papa Johns 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 Papa Johns International, you can compare the effects of market volatilities on Compass Group and Papa Johns 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 Papa Johns. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Group and Papa Johns.
Diversification Opportunities for Compass Group and Papa Johns
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Compass and Papa is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Compass Group PLC and Papa Johns International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Papa Johns International 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 Papa Johns. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Papa Johns International has no effect on the direction of Compass Group i.e., Compass Group and Papa Johns go up and down completely randomly.
Pair Corralation between Compass Group and Papa Johns
Assuming the 90 days horizon Compass Group PLC is expected to generate 0.66 times more return on investment than Papa Johns. However, Compass Group PLC is 1.51 times less risky than Papa Johns. It trades about -0.07 of its potential returns per unit of risk. Papa Johns International is currently generating about -0.19 per unit of risk. If you would invest 2,812 in Compass Group PLC on January 20, 2024 and sell it today you would lose (103.00) from holding Compass Group PLC or give up 3.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
Compass Group PLC vs. Papa Johns International
Performance |
| Timeline |
| Compass Group PLC |
| Papa Johns International |
Compass Group and Papa Johns Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compass Group and Papa Johns
The main advantage of trading using opposite Compass Group and Papa Johns positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compass Group position performs unexpectedly, Papa Johns 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 Papa Johns will offset losses from the drop in Papa Johns' long position.| Compass Group vs. McDonalds | Compass Group vs. Chuys Holdings | Compass Group vs. Brinker International | Compass Group vs. Bloomin Brands |
| Papa Johns vs. Yum Brands | Papa Johns vs. Wingstop | Papa Johns vs. Darden Restaurants | Papa Johns vs. Chipotle Mexican Grill |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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