Correlation Between Advantage Solutions and Leading Edge
Can any of the company-specific risk be diversified away by investing in both Advantage Solutions and Leading Edge 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 Leading Edge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advantage Solutions and Leading Edge Materials, you can compare the effects of market volatilities on Advantage Solutions and Leading Edge 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 Leading Edge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advantage Solutions and Leading Edge.
Diversification Opportunities for Advantage Solutions and Leading Edge
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Advantage and Leading is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Advantage Solutions and Leading Edge Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leading Edge Materials 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 Leading Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leading Edge Materials has no effect on the direction of Advantage Solutions i.e., Advantage Solutions and Leading Edge go up and down completely randomly.
Pair Corralation between Advantage Solutions and Leading Edge
Assuming the 90 days horizon Advantage Solutions is expected to generate 2.34 times more return on investment than Leading Edge. However, Advantage Solutions is 2.34 times more volatile than Leading Edge Materials. It trades about 0.09 of its potential returns per unit of risk. Leading Edge Materials is currently generating about -0.04 per unit of risk. If you would invest 1.48 in Advantage Solutions on October 25, 2024 and sell it today you would earn a total of 0.11 from holding Advantage Solutions or generate 7.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advantage Solutions vs. Leading Edge Materials
Performance |
| Timeline |
| Advantage Solutions |
| Leading Edge Materials |
Advantage Solutions and Leading Edge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advantage Solutions and Leading Edge
The main advantage of trading using opposite Advantage Solutions and Leading Edge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advantage Solutions position performs unexpectedly, Leading Edge 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 Leading Edge will offset losses from the drop in Leading Edge's long position.| Advantage Solutions vs. CannBioRx Life Sciences | Advantage Solutions vs. GCM Grosvenor | Advantage Solutions vs. CuriosityStream |
| Leading Edge vs. Grid Metals Corp | Leading Edge vs. Fireweed Zinc | Leading Edge vs. First American Silver | Leading Edge vs. Australian Strategic Materials |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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