Correlation Between Sea and Advantage Solutions

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

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

Diversification Opportunities for Sea and Advantage Solutions

-0.52

Correlation Coefficient

Sea  Advantage Solutions

Excellent diversification

The 3 months correlation between Sea and Advantage is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Sea and Advantage Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantage Solutions and Sea 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 Sea 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 Sea i.e., Sea and Advantage Solutions go up and down completely randomly.

Pair Corralation between Sea and Advantage Solutions

Allowing for the 90-day total investment horizon Sea is expected to generate 0.65 times more return on investment than Advantage Solutions. However, Sea is 1.55 times less risky than Advantage Solutions. It trades about 0.28 of its potential returns per unit of risk. Advantage Solutions is currently generating about 0.0 per unit of risk. If you would invest  7,740  in Sea on September 1, 2024 and sell it today you would earn a total of  3,640  from holding Sea or generate 47.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Sea  vs.  Advantage Solutions

Sea

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sea are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sea exhibited solid returns over the last few months and may actually be approaching a breakup point.

Advantage Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sea and Advantage Solutions

The main advantage of trading using opposite Sea and Advantage Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sea 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 Sea 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.