Correlation Between Advantage Solutions and Hudson Resources

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

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

Diversification Opportunities for Advantage Solutions and Hudson Resources

0.49

Correlation Coefficient

Advantage Solutions  Hudson Resources

Very weak diversification

The 3 months correlation between Advantage and Hudson is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Advantage Solutions and Hudson Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hudson Resources 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 Hudson Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hudson Resources has no effect on the direction of Advantage Solutions i.e., Advantage Solutions and Hudson Resources go up and down completely randomly.

Pair Corralation between Advantage Solutions and Hudson Resources

Assuming the 90 days horizon Advantage Solutions is expected to generate 1.96 times less return on investment than Hudson Resources. But when comparing it to its historical volatility, Advantage Solutions is 1.12 times less risky than Hudson Resources. It trades about 0.04 of its potential returns per unit of risk. Hudson Resources is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Hudson Resources on December 2, 2024 and sell it today you would earn a total of  0.00  from holding Hudson Resources or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Advantage Solutions  vs.  Hudson Resources

Advantage Solutions

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Advantage Solutions are ranked lower than 2 (%) 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.

Hudson Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hudson Resources are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hudson Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advantage Solutions and Hudson Resources

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

The idea behind Advantage Solutions and Hudson Resources 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.