Correlation Between Compass Group and Solution Financial

Can any of the company-specific risk be diversified away by investing in both Compass Group and Solution Financial 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 Solution Financial 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 Solution Financial, you can compare the effects of market volatilities on Compass Group and Solution Financial 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 Solution Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Group and Solution Financial.

Diversification Opportunities for Compass Group and Solution Financial

0.05

Correlation Coefficient

Compass Group  Solution Financial

Significant diversification

The 3 months correlation between Compass and Solution is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Compass Group PLC and Solution Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solution Financial 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 Solution Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solution Financial has no effect on the direction of Compass Group i.e., Compass Group and Solution Financial go up and down completely randomly.

Pair Corralation between Compass Group and Solution Financial

Assuming the 90 days horizon Compass Group PLC is expected to under-perform the Solution Financial. But the pink sheet apears to be less risky and, when comparing its historical volatility, Compass Group PLC is 1.21 times less risky than Solution Financial. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Solution Financial is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  20.00  in Solution Financial on July 25, 2025 and sell it today you would earn a total of  0.00  from holding Solution Financial or generate 0.0% return on investment over 90 days.

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

Compass Group PLC  vs.  Solution Financial

Compass Group PLC

Risk-Adjusted Performance

Weakest

Over the last 90 days Compass Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Compass Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Solution Financial

Risk-Adjusted Performance

Weakest

Over the last 90 days Solution Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Solution Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Compass Group and Solution Financial

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

The idea behind Compass Group PLC and Solution Financial 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .