Correlation Between Optical Cable and First Advantage

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

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

Diversification Opportunities for Optical Cable and First Advantage

0.21

Correlation Coefficient

Optical Cable  First Advantage

Modest diversification

The 3 months correlation between Optical and First is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Optical Cable 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 Optical Cable 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 Optical Cable 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 Optical Cable i.e., Optical Cable and First Advantage go up and down completely randomly.

Pair Corralation between Optical Cable and First Advantage

Considering the 90-day investment horizon Optical Cable is expected to generate 2.12 times more return on investment than First Advantage. However, Optical Cable is 2.12 times more volatile than First Advantage Corp. It trades about 0.14 of its potential returns per unit of risk. First Advantage Corp is currently generating about 0.13 per unit of risk. If you would invest  308.00  in Optical Cable on May 1, 2025 and sell it today you would earn a total of  171.00  from holding Optical Cable or generate 55.52% return on investment over 90 days.

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

Optical Cable  vs.  First Advantage Corp

Optical Cable

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Optical Cable are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Optical Cable exhibited solid returns over the last few months and may actually be approaching a breakup point.

First Advantage Corp

Risk-Adjusted Performance

OK

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

Pair Trading with Optical Cable and First Advantage

The main advantage of trading using opposite Optical Cable and First Advantage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Optical Cable 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 Optical Cable 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 AI Portfolio Prophet module to use AI to generate optimal portfolios and find profitable investment opportunities.