Correlation Between Compass Diversified and Cherry Hill

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

By analyzing existing cross correlation between Compass Diversified and Cherry Hill Mortgage, you can compare the effects of market volatilities on Compass Diversified and Cherry Hill 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 Cherry Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Diversified and Cherry Hill.

Diversification Opportunities for Compass Diversified and Cherry Hill

0.53

Correlation Coefficient

Compass Diversified  Cherry Hill

Very weak diversification

The 3 months correlation between Compass and Cherry is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified and Cherry Hill Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cherry Hill Mortgage 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 Cherry Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cherry Hill Mortgage has no effect on the direction of Compass Diversified i.e., Compass Diversified and Cherry Hill go up and down completely randomly.

Pair Corralation between Compass Diversified and Cherry Hill

Assuming the 90 days trading horizon Compass Diversified is expected to under-perform the Cherry Hill. In addition to that, Compass Diversified is 5.81 times more volatile than Cherry Hill Mortgage. It trades about -0.03 of its total potential returns per unit of risk. Cherry Hill Mortgage is currently generating about -0.06 per unit of volatility. If you would invest  2,117  in Cherry Hill Mortgage on May 5, 2025 and sell it today you would lose (66.00) from holding Cherry Hill Mortgage or give up 3.12% of portfolio value over 90 days.

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

Compass Diversified  vs.  Cherry Hill Mortgage

Compass Diversified

Risk-Adjusted Performance

Very Weak

Over the last 90 days Compass Diversified has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Preferred Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Cherry Hill Mortgage

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cherry Hill Mortgage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Cherry Hill is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Compass Diversified and Cherry Hill

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

The idea behind Compass Diversified and Cherry Hill Mortgage 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.