Correlation Between Azucar Minerals and Advantage Solutions

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

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

Diversification Opportunities for Azucar Minerals and Advantage Solutions

-0.09

Correlation Coefficient

Azucar Minerals  Advantage Solutions

Good diversification

The 3 months correlation between Azucar and Advantage is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Azucar Minerals and Advantage Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantage Solutions and Azucar Minerals 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 Azucar Minerals 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 Azucar Minerals i.e., Azucar Minerals and Advantage Solutions go up and down completely randomly.

Pair Corralation between Azucar Minerals and Advantage Solutions

Assuming the 90 days horizon Azucar Minerals is expected to generate 1.61 times less return on investment than Advantage Solutions. But when comparing it to its historical volatility, Azucar Minerals is 1.02 times less risky than Advantage Solutions. It trades about 0.04 of its potential returns per unit of risk. Advantage Solutions is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1.27  in Advantage Solutions on December 30, 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	98.39%
Values	Daily Returns

Azucar Minerals  vs.  Advantage Solutions

Azucar Minerals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Azucar Minerals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Azucar Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Azucar Minerals and Advantage Solutions

The main advantage of trading using opposite Azucar Minerals and Advantage Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Azucar Minerals 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 Azucar Minerals 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.