Correlation Between Tree Island and Advantage Solutions

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

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

Diversification Opportunities for Tree Island and Advantage Solutions

-0.3

Correlation Coefficient

Tree Island  Advantage Solutions

Very good diversification

The 3 months correlation between Tree and Advantage is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Tree Island Steel and Advantage Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantage Solutions and Tree Island 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 Tree Island Steel 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 Tree Island i.e., Tree Island and Advantage Solutions go up and down completely randomly.

Pair Corralation between Tree Island and Advantage Solutions

Assuming the 90 days horizon Tree Island Steel is expected to generate 0.14 times more return on investment than Advantage Solutions. However, Tree Island Steel is 7.09 times less risky than Advantage Solutions. It trades about 0.01 of its potential returns per unit of risk. Advantage Solutions is currently generating about -0.16 per unit of risk. If you would invest  207.00  in Tree Island Steel on September 15, 2024 and sell it today you would earn a total of  0.00  from holding Tree Island Steel or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

Tree Island Steel  vs.  Advantage Solutions

Tree Island Steel

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tree Island Steel are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Tree Island may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Tree Island and Advantage Solutions

The main advantage of trading using opposite Tree Island and Advantage Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tree Island 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 Tree Island Steel 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.