Correlation Between Compass Diversified and Quanex Building

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

Diversification Opportunities for Compass Diversified and Quanex Building

0.16

Correlation Coefficient

Compass Diversified  Quanex Building

Average diversification

The 3 months correlation between Compass and Quanex is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified Holdings and Quanex Building Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quanex Building Products 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 Quanex Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quanex Building Products has no effect on the direction of Compass Diversified i.e., Compass Diversified and Quanex Building go up and down completely randomly.

Pair Corralation between Compass Diversified and Quanex Building

Given the investment horizon of 90 days Compass Diversified is expected to generate 4.14 times less return on investment than Quanex Building. In addition to that, Compass Diversified is 1.15 times more volatile than Quanex Building Products. It trades about 0.03 of its total potential returns per unit of risk. Quanex Building Products is currently generating about 0.12 per unit of volatility. If you would invest  1,809  in Quanex Building Products on May 27, 2025 and sell it today you would earn a total of  438.00  from holding Quanex Building Products or generate 24.21% return on investment over 90 days.

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

Compass Diversified Holdings  vs.  Quanex Building Products

Compass Diversified

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Compass Diversified Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Compass Diversified is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Quanex Building Products

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Quanex Building Products are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Quanex Building showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compass Diversified and Quanex Building

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

The idea behind Compass Diversified Holdings and Quanex Building Products 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 Commodity Directory module to find actively traded commodities issued by global exchanges.