Correlation Between Exponent and First Advantage

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

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

Diversification Opportunities for Exponent and First Advantage

-0.43

Correlation Coefficient

Exponent  First Advantage

Very good diversification

The 3 months correlation between Exponent and First is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Exponent and First Advantage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Advantage Corp and Exponent 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 Exponent are associated (or correlated) with First Advantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Advantage Corp has no effect on the direction of Exponent i.e., Exponent and First Advantage go up and down completely randomly.

Pair Corralation between Exponent and First Advantage

Given the investment horizon of 90 days Exponent is expected to under-perform the First Advantage. But the stock apears to be less risky and, when comparing its historical volatility, Exponent is 2.46 times less risky than First Advantage. The stock trades about -0.09 of its potential returns per unit of risk. The First Advantage Corp is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,882  in First Advantage Corp on March 27, 2025 and sell it today you would lose (230.00) from holding First Advantage Corp or give up 12.22% of portfolio value over 90 days.

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

Exponent  vs.  First Advantage Corp

Exponent

Risk-Adjusted Performance

Very Weak

Over the last 90 days Exponent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

First Advantage Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Advantage Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, First Advantage sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Exponent and First Advantage

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

The idea behind Exponent and First Advantage Corp 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.