Correlation Between Advantage Solutions and SCHNITZER STEEL

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

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

Diversification Opportunities for Advantage Solutions and SCHNITZER STEEL

-0.39

Correlation Coefficient

Advantage Solutions  SCHNITZER STEEL

Very good diversification

The 3 months correlation between Advantage and SCHNITZER is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Advantage Solutions and SCHNITZER STEEL INDUSTRIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCHNITZER STEEL INDU 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 SCHNITZER STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCHNITZER STEEL INDU has no effect on the direction of Advantage Solutions i.e., Advantage Solutions and SCHNITZER STEEL go up and down completely randomly.

Pair Corralation between Advantage Solutions and SCHNITZER STEEL

Assuming the 90 days horizon Advantage Solutions is expected to generate 6.86 times more return on investment than SCHNITZER STEEL. However, Advantage Solutions is 6.86 times more volatile than SCHNITZER STEEL INDUSTRIES. It trades about 0.05 of its potential returns per unit of risk. SCHNITZER STEEL INDUSTRIES is currently generating about 0.03 per unit of risk. If you would invest  13.00  in Advantage Solutions on September 21, 2024 and sell it today you would lose (11.45) from holding Advantage Solutions or give up 88.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	37.53%
Values	Daily Returns

Advantage Solutions  vs.  SCHNITZER STEEL INDUSTRIES

Advantage Solutions

Risk-Adjusted Performance

5 of 100

Insignificant

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.

SCHNITZER STEEL INDU

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SCHNITZER STEEL INDUSTRIES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, SCHNITZER STEEL is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Advantage Solutions and SCHNITZER STEEL

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

The idea behind Advantage Solutions and SCHNITZER STEEL INDUSTRIES 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.