Correlation Between Compass Diversified and American Express

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

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

Diversification Opportunities for Compass Diversified and American Express

0.31

Correlation Coefficient

Compass Diversified  American Express

Weak diversification

The 3 months correlation between Compass and American is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified Holdings and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express 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 Holdings are associated (or correlated) with American Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Express has no effect on the direction of Compass Diversified i.e., Compass Diversified and American Express go up and down completely randomly.

Pair Corralation between Compass Diversified and American Express

Given the investment horizon of 90 days Compass Diversified Holdings is expected to generate 2.29 times more return on investment than American Express. However, Compass Diversified is 2.29 times more volatile than American Express. It trades about 0.05 of its potential returns per unit of risk. American Express is currently generating about 0.09 per unit of risk. If you would invest  628.00  in Compass Diversified Holdings on June 30, 2025 and sell it today you would earn a total of  44.00  from holding Compass Diversified Holdings or generate 7.01% return on investment over 90 days.

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

Compass Diversified Holdings  vs.  American Express

Compass Diversified

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Compass Diversified Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile fundamental indicators, Compass Diversified may actually be approaching a critical reversion point that can send shares even higher in October 2025.

American Express

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, American Express may actually be approaching a critical reversion point that can send shares even higher in October 2025.

Pair Trading with Compass Diversified and American Express

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

The idea behind Compass Diversified Holdings and American Express 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.