Correlation Between First Advantage and RB Global

Can any of the company-specific risk be diversified away by investing in both First Advantage and RB Global 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 RB Global 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 RB Global, you can compare the effects of market volatilities on First Advantage and RB Global 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 RB Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Advantage and RB Global.

Diversification Opportunities for First Advantage and RB Global

-0.45

Correlation Coefficient

First Advantage  RB Global

Very good diversification

The 3 months correlation between First and RBA is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding First Advantage Corp and RB Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RB Global 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 RB Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RB Global has no effect on the direction of First Advantage i.e., First Advantage and RB Global go up and down completely randomly.

Pair Corralation between First Advantage and RB Global

Allowing for the 90-day total investment horizon First Advantage Corp is expected to generate 4.01 times more return on investment than RB Global. However, First Advantage is 4.01 times more volatile than RB Global. It trades about 0.08 of its potential returns per unit of risk. RB Global is currently generating about -0.37 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  51.00  from holding First Advantage Corp or generate 3.17% 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.  RB Global

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.

RB Global

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RB Global are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, RB Global sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Advantage and RB Global

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

The idea behind First Advantage Corp and RB Global 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.