Correlation Between Clearwater Analytics and First Advantage

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

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

Diversification Opportunities for Clearwater Analytics and First Advantage

0.18

Correlation Coefficient

Clearwater Analytics  First Advantage

Average diversification

The 3 months correlation between Clearwater and First is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Clearwater Analytics Holdings 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 Clearwater Analytics 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 Clearwater Analytics Holdings 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 Clearwater Analytics i.e., Clearwater Analytics and First Advantage go up and down completely randomly.

Pair Corralation between Clearwater Analytics and First Advantage

Given the investment horizon of 90 days Clearwater Analytics Holdings is expected to generate 0.91 times more return on investment than First Advantage. However, Clearwater Analytics Holdings is 1.1 times less risky than First Advantage. It trades about -0.02 of its potential returns per unit of risk. First Advantage Corp is currently generating about -0.16 per unit of risk. If you would invest  2,767  in Clearwater Analytics Holdings on December 30, 2024 and sell it today you would lose (114.00) from holding Clearwater Analytics Holdings or give up 4.12% of portfolio value over 90 days.

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

Clearwater Analytics Holdings  vs.  First Advantage Corp

Clearwater Analytics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Clearwater Analytics Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Clearwater Analytics is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

First Advantage Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Advantage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Clearwater Analytics and First Advantage

The main advantage of trading using opposite Clearwater Analytics and First Advantage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clearwater Analytics 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 Clearwater Analytics Holdings 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.