Correlation Between Compass Diversified and Array Technologies

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

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

Diversification Opportunities for Compass Diversified and Array Technologies

-0.7

Correlation Coefficient

Compass Diversified  Array Technologies

Excellent diversification

The 3 months correlation between Compass and Array is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified and Array Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Array 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 are associated (or correlated) with Array Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Array Technologies has no effect on the direction of Compass Diversified i.e., Compass Diversified and Array Technologies go up and down completely randomly.

Pair Corralation between Compass Diversified and Array Technologies

Assuming the 90 days trading horizon Compass Diversified is expected to under-perform the Array Technologies. But the preferred stock apears to be less risky and, when comparing its historical volatility, Compass Diversified is 1.19 times less risky than Array Technologies. The preferred stock trades about -0.01 of its potential returns per unit of risk. The Array Technologies is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  418.00  in Array Technologies on April 21, 2025 and sell it today you would earn a total of  292.00  from holding Array Technologies or generate 69.86% return on investment over 90 days.

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

Compass Diversified  vs.  Array Technologies

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. In spite of rather sound fundamental indicators, Compass Diversified is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Array Technologies

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Array Technologies are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Array Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compass Diversified and Array Technologies

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

The idea behind Compass Diversified and Array Technologies 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.