Correlation Between Gensource Potash and Advantage Solutions

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

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

Diversification Opportunities for Gensource Potash and Advantage Solutions

0.16

Correlation Coefficient

Gensource Potash  Advantage Solutions

Average diversification

The 3 months correlation between Gensource and Advantage is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Gensource Potash and Advantage Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantage Solutions and Gensource Potash 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 Gensource Potash 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 Gensource Potash i.e., Gensource Potash and Advantage Solutions go up and down completely randomly.

Pair Corralation between Gensource Potash and Advantage Solutions

Assuming the 90 days horizon Gensource Potash is expected to under-perform the Advantage Solutions. But the pink sheet apears to be less risky and, when comparing its historical volatility, Gensource Potash is 1.65 times less risky than Advantage Solutions. The pink sheet trades about -0.22 of its potential returns per unit of risk. The Advantage Solutions is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2.30  in Advantage Solutions on September 12, 2024 and sell it today you would lose (0.50) from holding Advantage Solutions or give up 21.74% of portfolio value over 90 days.

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

Gensource Potash  vs.  Advantage Solutions

Gensource Potash

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gensource Potash are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal fundamental indicators, Gensource Potash reported solid returns over the last few months and may actually be approaching a breakup point.

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 Gensource Potash and Advantage Solutions

The main advantage of trading using opposite Gensource Potash and Advantage Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gensource Potash 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 Gensource Potash 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.