Correlation Between Parkson Retail and Compass Group

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

By analyzing existing cross correlation between Parkson Retail Group and Compass Group PLC, you can compare the effects of market volatilities on Parkson Retail and Compass Group 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 Parkson Retail with a short position of Compass Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Parkson Retail and Compass Group.

Diversification Opportunities for Parkson Retail and Compass Group

-0.41

Correlation Coefficient

Parkson Retail  Compass Group

Very good diversification

The 3 months correlation between Parkson and Compass is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Parkson Retail Group and Compass Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Group PLC and Parkson Retail 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 Parkson Retail Group are associated (or correlated) with Compass Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Group PLC has no effect on the direction of Parkson Retail i.e., Parkson Retail and Compass Group go up and down completely randomly.

Pair Corralation between Parkson Retail and Compass Group

Assuming the 90 days trading horizon Parkson Retail Group is expected to under-perform the Compass Group. In addition to that, Parkson Retail is 2.95 times more volatile than Compass Group PLC. It trades about -0.01 of its total potential returns per unit of risk. Compass Group PLC is currently generating about 0.06 per unit of volatility. If you would invest  2,946  in Compass Group PLC on April 24, 2025 and sell it today you would earn a total of  148.00  from holding Compass Group PLC or generate 5.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Parkson Retail Group  vs.  Compass Group PLC

Parkson Retail Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Parkson Retail Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Parkson Retail is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Compass Group PLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compass Group PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Compass Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Parkson Retail and Compass Group

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

The idea behind Parkson Retail Group and Compass Group PLC 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.