Correlation Between Compass Diversified and Chimera Investment

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

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

Diversification Opportunities for Compass Diversified and Chimera Investment

-0.1

Correlation Coefficient

Compass Diversified  Chimera Investment

Good diversification

The 3 months correlation between Compass and Chimera is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified and Chimera Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chimera Investment 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 Chimera Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chimera Investment has no effect on the direction of Compass Diversified i.e., Compass Diversified and Chimera Investment go up and down completely randomly.

Pair Corralation between Compass Diversified and Chimera Investment

Assuming the 90 days trading horizon Compass Diversified is expected to under-perform the Chimera Investment. In addition to that, Compass Diversified is 10.65 times more volatile than Chimera Investment. It trades about -0.04 of its total potential returns per unit of risk. Chimera Investment is currently generating about 0.05 per unit of volatility. If you would invest  2,410  in Chimera Investment on May 2, 2025 and sell it today you would earn a total of  34.00  from holding Chimera Investment or generate 1.41% return on investment over 90 days.

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

Compass Diversified  vs.  Chimera Investment

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 weak performance in the last few months, the Preferred Stock's fundamental indicators remain rather sound which may send shares a bit higher in August 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Chimera Investment

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chimera Investment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Chimera Investment is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Compass Diversified and Chimera Investment

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

The idea behind Compass Diversified and Chimera Investment 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.