Correlation Between Equifax and FTI Consulting

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

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

Diversification Opportunities for Equifax and FTI Consulting

0.71

Correlation Coefficient

Equifax  FTI Consulting

Poor diversification

The 3 months correlation between Equifax and FTI is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Equifax and FTI Consulting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTI Consulting and Equifax 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 Equifax are associated (or correlated) with FTI Consulting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTI Consulting has no effect on the direction of Equifax i.e., Equifax and FTI Consulting go up and down completely randomly.

Pair Corralation between Equifax and FTI Consulting

Considering the 90-day investment horizon Equifax is expected to generate 0.88 times more return on investment than FTI Consulting. However, Equifax is 1.14 times less risky than FTI Consulting. It trades about -0.04 of its potential returns per unit of risk. FTI Consulting is currently generating about -0.13 per unit of risk. If you would invest  25,557  in Equifax on December 27, 2024 and sell it today you would lose (1,384) from holding Equifax or give up 5.42% of portfolio value over 90 days.

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

Equifax  vs.  FTI Consulting

Equifax

Risk-Adjusted Performance

Very Weak

Over the last 90 days Equifax has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Equifax is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

FTI Consulting

Risk-Adjusted Performance

Very Weak

Over the last 90 days FTI Consulting has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Equifax and FTI Consulting

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

The idea behind Equifax and FTI Consulting 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.