Correlation Between Advantage Solutions and Lion One

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

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

Diversification Opportunities for Advantage Solutions and Lion One

-0.12

Correlation Coefficient

Advantage Solutions  Lion One

Good diversification

The 3 months correlation between Advantage and Lion is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Advantage Solutions and Lion One Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion One Metals 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 Lion One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion One Metals has no effect on the direction of Advantage Solutions i.e., Advantage Solutions and Lion One go up and down completely randomly.

Pair Corralation between Advantage Solutions and Lion One

Assuming the 90 days horizon Advantage Solutions is expected to generate 2.41 times more return on investment than Lion One. However, Advantage Solutions is 2.41 times more volatile than Lion One Metals. It trades about 0.06 of its potential returns per unit of risk. Lion One Metals is currently generating about 0.1 per unit of risk. If you would invest  1.27  in Advantage Solutions on December 29, 2024 and sell it today you would lose (0.07) from holding Advantage Solutions or give up 5.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Advantage Solutions  vs.  Lion One Metals

Advantage Solutions

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Advantage Solutions are ranked lower than 4 (%) 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.

Lion One Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lion One Metals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Lion One reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advantage Solutions and Lion One

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

The idea behind Advantage Solutions and Lion One Metals 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.