Correlation Between Advantage Solutions and East Africa

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Can any of the company-specific risk be diversified away by investing in both Advantage Solutions and East Africa 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 Advantage Solutions and East Africa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advantage Solutions and East Africa Metals, you can compare the effects of market volatilities on Advantage Solutions and East Africa 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 Advantage Solutions with a short position of East Africa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advantage Solutions and East Africa.

Diversification Opportunities for Advantage Solutions and East Africa

-0.16
  Correlation Coefficient

Good diversification

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

Pair Corralation between Advantage Solutions and East Africa

Assuming the 90 days horizon Advantage Solutions is expected to generate 1.07 times less return on investment than East Africa. In addition to that, Advantage Solutions is 1.09 times more volatile than East Africa Metals. It trades about 0.06 of its total potential returns per unit of risk. East Africa Metals is currently generating about 0.07 per unit of volatility. If you would invest  6.26  in East Africa Metals on September 13, 2024 and sell it today you would earn a total of  4.74  from holding East Africa Metals or generate 75.72% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy94.4%
ValuesDaily Returns

Advantage Solutions  vs.  East Africa Metals

 Performance 
       Timeline  
Advantage Solutions 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Advantage Solutions are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Advantage Solutions showed solid returns over the last few months and may actually be approaching a breakup point.
East Africa Metals 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days East Africa Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Advantage Solutions and East Africa Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Advantage Solutions and East Africa

The main advantage of trading using opposite Advantage Solutions and East Africa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advantage Solutions position performs unexpectedly, East Africa 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 East Africa will offset losses from the drop in East Africa's long position.
The idea behind Advantage Solutions and East Africa Metals 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.

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