Correlation Between First Quantum and Advantage Solutions

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

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

Diversification Opportunities for First Quantum and Advantage Solutions

0.13

Correlation Coefficient

First Quantum  Advantage Solutions

Average diversification

The 3 months correlation between First and Advantage is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding First Quantum Minerals and Advantage Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantage Solutions and First Quantum 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 First Quantum 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 First Quantum i.e., First Quantum and Advantage Solutions go up and down completely randomly.

Pair Corralation between First Quantum and Advantage Solutions

Assuming the 90 days horizon First Quantum is expected to generate 3.23 times less return on investment than Advantage Solutions. But when comparing it to its historical volatility, First Quantum Minerals is 7.54 times less risky than Advantage Solutions. It trades about 0.16 of its potential returns per unit of risk. Advantage Solutions is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2.89  in Advantage Solutions on September 5, 2024 and sell it today you would lose (0.90) from holding Advantage Solutions or give up 31.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	92.19%
Values	Daily Returns

First Quantum Minerals  vs.  Advantage Solutions

First Quantum Minerals

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Quantum Minerals are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal essential indicators, First Quantum 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 First Quantum and Advantage Solutions

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

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.