Correlation Between Advantage Solutions and Canada Carbon

Can any of the company-specific risk be diversified away by investing in both Advantage Solutions and Canada Carbon 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 Canada Carbon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Advantage Solutions and Canada Carbon, you can compare the effects of market volatilities on Advantage Solutions and Canada Carbon 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 Canada Carbon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advantage Solutions and Canada Carbon.

Diversification Opportunities for Advantage Solutions and Canada Carbon

0.14

Correlation Coefficient

Advantage Solutions  Canada Carbon

Average diversification

The 3 months correlation between Advantage and Canada is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Advantage Solutions and Canada Carbon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canada Carbon 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 Canada Carbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canada Carbon has no effect on the direction of Advantage Solutions i.e., Advantage Solutions and Canada Carbon go up and down completely randomly.

Pair Corralation between Advantage Solutions and Canada Carbon

Assuming the 90 days horizon Advantage Solutions is expected to generate 12.37 times less return on investment than Canada Carbon. But when comparing it to its historical volatility, Advantage Solutions is 5.46 times less risky than Canada Carbon. It trades about 0.07 of its potential returns per unit of risk. Canada Carbon is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.99  in Canada Carbon on September 15, 2024 and sell it today you would earn a total of  0.51  from holding Canada Carbon or generate 51.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.85%
Values	Daily Returns

Advantage Solutions  vs.  Canada Carbon

Advantage Solutions

Risk-Adjusted Performance

5 of 100

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.

Canada Carbon

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canada Carbon are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Canada Carbon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advantage Solutions and Canada Carbon

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

The idea behind Advantage Solutions and Canada Carbon 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..