Correlation Between ICF International and Advantage Solutions

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

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

Diversification Opportunities for ICF International and Advantage Solutions

-0.3

Correlation Coefficient

ICF International  Advantage Solutions

Very good diversification

The 3 months correlation between ICF and Advantage is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding ICF International and Advantage Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantage Solutions and ICF International 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 ICF International 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 ICF International i.e., ICF International and Advantage Solutions go up and down completely randomly.

Pair Corralation between ICF International and Advantage Solutions

Given the investment horizon of 90 days ICF International is expected to under-perform the Advantage Solutions. But the stock apears to be less risky and, when comparing its historical volatility, ICF International is 23.83 times less risky than Advantage Solutions. The stock trades about -0.12 of its potential returns per unit of risk. The Advantage Solutions is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  8.50  in Advantage Solutions on March 2, 2024 and sell it today you would earn a total of  1.49  from holding Advantage Solutions or generate 17.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	61.9%
Values	Daily Returns

ICF International  vs.  Advantage Solutions

ICF International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ICF International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Advantage Solutions

Risk-Adjusted Performance

0 of 100

OK

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 abnormal basic indicators, Advantage Solutions showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ICF International and Advantage Solutions

The main advantage of trading using opposite ICF International and Advantage Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ICF International 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 ICF International 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.