Correlation Between Stella Jones and Advantage Solutions

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

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

Diversification Opportunities for Stella Jones and Advantage Solutions

0.32

Correlation Coefficient

Stella Jones  Advantage Solutions

Weak diversification

The 3 months correlation between Stella and Advantage is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Stella Jones and Advantage Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantage Solutions and Stella Jones 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 Stella Jones 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 Stella Jones i.e., Stella Jones and Advantage Solutions go up and down completely randomly.

Pair Corralation between Stella Jones and Advantage Solutions

Assuming the 90 days horizon Stella Jones is expected to under-perform the Advantage Solutions. But the pink sheet apears to be less risky and, when comparing its historical volatility, Stella Jones is 9.35 times less risky than Advantage Solutions. The pink sheet trades about -0.18 of its potential returns per unit of risk. The Advantage Solutions is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2.50  in Advantage Solutions on September 12, 2024 and sell it today you would lose (0.70) from holding Advantage Solutions or give up 28.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.65%
Values	Daily Returns

Stella Jones  vs.  Advantage Solutions

Stella Jones

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stella Jones has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward-looking indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 Stella Jones and Advantage Solutions

The main advantage of trading using opposite Stella Jones and Advantage Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stella Jones 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 Stella Jones 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.