Correlation Between Exponent and Equifax

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

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

Diversification Opportunities for Exponent and Equifax

0.69

Correlation Coefficient

Exponent  Equifax

Poor diversification

The 3 months correlation between Exponent and Equifax is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Exponent and Equifax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equifax 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 Equifax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equifax has no effect on the direction of Exponent i.e., Exponent and Equifax go up and down completely randomly.

Pair Corralation between Exponent and Equifax

Given the investment horizon of 90 days Exponent is expected to generate 1.27 times more return on investment than Equifax. However, Exponent is 1.27 times more volatile than Equifax. It trades about -0.05 of its potential returns per unit of risk. Equifax is currently generating about -0.14 per unit of risk. If you would invest  10,606  in Exponent on August 31, 2024 and sell it today you would lose (745.00) from holding Exponent or give up 7.02% of portfolio value over 90 days.

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

Exponent  vs.  Equifax

Exponent

Risk-Adjusted Performance

0 of 100

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 very healthy basic indicators, Exponent is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Equifax

Risk-Adjusted Performance

0 of 100

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 inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Exponent and Equifax

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

The idea behind Exponent and Equifax 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.