Correlation Between ADTRAN and Advantage Solutions
Can any of the company-specific risk be diversified away by investing in both ADTRAN and Advantage Solutions 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 ADTRAN and Advantage Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ADTRAN Inc and Advantage Solutions, you can compare the effects of market volatilities on ADTRAN and Advantage Solutions 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 ADTRAN with a short position of Advantage Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of ADTRAN and Advantage Solutions.
Diversification Opportunities for ADTRAN and Advantage Solutions
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ADTRAN and Advantage is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding ADTRAN Inc and Advantage Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantage Solutions and ADTRAN 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 ADTRAN Inc are associated (or correlated) with Advantage Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advantage Solutions has no effect on the direction of ADTRAN i.e., ADTRAN and Advantage Solutions go up and down completely randomly.
Pair Corralation between ADTRAN and Advantage Solutions
Given the investment horizon of 90 days ADTRAN Inc is expected to generate 1.19 times more return on investment than Advantage Solutions. However, ADTRAN is 1.19 times more volatile than Advantage Solutions. It trades about 0.27 of its potential returns per unit of risk. Advantage Solutions is currently generating about 0.17 per unit of risk. If you would invest 645.00 in ADTRAN Inc on August 30, 2024 and sell it today you would earn a total of 194.00 from holding ADTRAN Inc or generate 30.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ADTRAN Inc vs. Advantage Solutions
Performance |
| Timeline |
| ADTRAN Inc |
| Advantage Solutions |
ADTRAN and Advantage Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ADTRAN and Advantage Solutions
The main advantage of trading using opposite ADTRAN and Advantage Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ADTRAN position performs unexpectedly, Advantage Solutions 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 Advantage Solutions will offset losses from the drop in Advantage Solutions' long position.| ADTRAN vs. Mynaric AG ADR | ADTRAN vs. KVH Industries | ADTRAN vs. Telesat Corp | ADTRAN vs. Digi International |
| Advantage Solutions vs. Criteo Sa | Advantage Solutions vs. Deluxe | Advantage Solutions vs. Emerald Expositions Events | Advantage Solutions vs. Marchex |
Check out your portfolio center.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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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