Correlation Between First Advantage and Aramark Holdings

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

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

Diversification Opportunities for First Advantage and Aramark Holdings

-0.42

Correlation Coefficient

First Advantage  Aramark Holdings

Very good diversification

The 3 months correlation between First and Aramark is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding First Advantage Corp and Aramark Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aramark Holdings and First Advantage 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 Advantage Corp are associated (or correlated) with Aramark Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aramark Holdings has no effect on the direction of First Advantage i.e., First Advantage and Aramark Holdings go up and down completely randomly.

Pair Corralation between First Advantage and Aramark Holdings

Allowing for the 90-day total investment horizon First Advantage Corp is expected to generate 1.66 times more return on investment than Aramark Holdings. However, First Advantage is 1.66 times more volatile than Aramark Holdings. It trades about 0.04 of its potential returns per unit of risk. Aramark Holdings is currently generating about -0.08 per unit of risk. If you would invest  1,608  in First Advantage Corp on January 31, 2024 and sell it today you would earn a total of  22.00  from holding First Advantage Corp or generate 1.37% return on investment over 90 days.

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

First Advantage Corp  vs.  Aramark Holdings

First Advantage Corp

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days First Advantage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, First Advantage is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Aramark Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aramark Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating primary indicators, Aramark Holdings may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with First Advantage and Aramark Holdings

The main advantage of trading using opposite First Advantage and Aramark Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Advantage position performs unexpectedly, Aramark Holdings 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 Aramark Holdings will offset losses from the drop in Aramark Holdings' long position.

The idea behind First Advantage Corp and Aramark Holdings 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.