Correlation Between Whole Earth and Advantage Solutions

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

By analyzing existing cross correlation between Whole Earth Brands and Advantage Solutions, you can compare the effects of market volatilities on Whole Earth 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 Whole Earth with a short position of Advantage Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Whole Earth and Advantage Solutions.

Diversification Opportunities for Whole Earth and Advantage Solutions

0.03

Correlation Coefficient

Whole Earth  Advantage Solutions

Significant diversification

The 3 months correlation between Whole and Advantage is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Whole Earth Brands and Advantage Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantage Solutions and Whole Earth 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 Whole Earth Brands 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 Whole Earth i.e., Whole Earth and Advantage Solutions go up and down completely randomly.

Pair Corralation between Whole Earth and Advantage Solutions

If you would invest  3.01  in Advantage Solutions on September 18, 2024 and sell it today you would lose (1.51) from holding Advantage Solutions or give up 50.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Whole Earth Brands  vs.  Advantage Solutions

Whole Earth Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Whole Earth Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Whole Earth is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Advantage Solutions

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Advantage Solutions are ranked lower than 3 (%) 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.

Pair Trading with Whole Earth and Advantage Solutions

The main advantage of trading using opposite Whole Earth and Advantage Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Whole Earth 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.

The idea behind Whole Earth Brands and Advantage Solutions 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.