Correlation Between Critical Elements and Advantage Solutions
Can any of the company-specific risk be diversified away by investing in both Critical Elements 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 Critical Elements and Advantage Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Critical Elements and Advantage Solutions, you can compare the effects of market volatilities on Critical Elements 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 Critical Elements with a short position of Advantage Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Critical Elements and Advantage Solutions.
Diversification Opportunities for Critical Elements and Advantage Solutions
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Critical and Advantage is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Critical Elements and Advantage Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantage Solutions and Critical Elements 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 Critical Elements 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 Critical Elements i.e., Critical Elements and Advantage Solutions go up and down completely randomly.
Pair Corralation between Critical Elements and Advantage Solutions
Assuming the 90 days horizon Critical Elements is expected to under-perform the Advantage Solutions. But the otc stock apears to be less risky and, when comparing its historical volatility, Critical Elements is 2.91 times less risky than Advantage Solutions. The otc stock trades about -0.4 of its potential returns per unit of risk. The Advantage Solutions is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2.50 in Advantage Solutions on September 3, 2024 and sell it today you would earn a total of 0.42 from holding Advantage Solutions or generate 16.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 90.0% |
| Values | Daily Returns |
Critical Elements vs. Advantage Solutions
Performance |
| Timeline |
| Critical Elements |
| Advantage Solutions |
Critical Elements and Advantage Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Critical Elements and Advantage Solutions
The main advantage of trading using opposite Critical Elements and Advantage Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Critical Elements 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.| Critical Elements vs. Advantage Solutions | Critical Elements vs. Atlas Corp | Critical Elements vs. PureCycle Technologies | Critical Elements vs. WM Technology |
| Advantage Solutions vs. CannBioRx Life Sciences | Advantage Solutions vs. GCM Grosvenor | Advantage Solutions vs. CuriosityStream | Advantage Solutions vs. HUMANA INC |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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