Correlation Between Eos Energy and Advantage Solutions

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

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

Diversification Opportunities for Eos Energy and Advantage Solutions

-0.1

Correlation Coefficient

Eos Energy  Advantage Solutions

Good diversification

The 3 months correlation between Eos and Advantage is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Eos Energy Enterprises and Advantage Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantage Solutions and Eos Energy 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 Eos Energy Enterprises 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 Eos Energy i.e., Eos Energy and Advantage Solutions go up and down completely randomly.

Pair Corralation between Eos Energy and Advantage Solutions

Assuming the 90 days horizon Eos Energy is expected to generate 13.07 times less return on investment than Advantage Solutions. But when comparing it to its historical volatility, Eos Energy Enterprises is 1.18 times less risky than Advantage Solutions. It trades about 0.0 of its potential returns per unit of risk. Advantage Solutions is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1.70  in Advantage Solutions on December 21, 2024 and sell it today you would lose (0.51) from holding Advantage Solutions or give up 30.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.67%
Values	Daily Returns

Eos Energy Enterprises  vs.  Advantage Solutions

Eos Energy Enterprises

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eos Energy Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Eos Energy is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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.

Pair Trading with Eos Energy and Advantage Solutions

The main advantage of trading using opposite Eos Energy and Advantage Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eos Energy 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 Eos Energy Enterprises 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.