Correlation Between First Advantage and Brinks

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

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

Diversification Opportunities for First Advantage and Brinks

0.71

Correlation Coefficient

First Advantage  Brinks

Poor diversification

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

Pair Corralation between First Advantage and Brinks

Allowing for the 90-day total investment horizon First Advantage Corp is expected to generate 1.2 times more return on investment than Brinks. However, First Advantage is 1.2 times more volatile than Brinks Company. It trades about 0.02 of its potential returns per unit of risk. Brinks Company is currently generating about -0.09 per unit of risk. If you would invest  1,891  in First Advantage Corp on September 1, 2024 and sell it today you would earn a total of  32.00  from holding First Advantage Corp or generate 1.69% return on investment over 90 days.

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

First Advantage Corp  vs.  Brinks Company

First Advantage Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Advantage Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, First Advantage is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Brinks Company

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with First Advantage and Brinks

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

The idea behind First Advantage Corp and Brinks Company 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.