Correlation Between First Advantage and Conduent

Can any of the company-specific risk be diversified away by investing in both First Advantage and Conduent 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 Conduent 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 Conduent, you can compare the effects of market volatilities on First Advantage and Conduent 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 Conduent. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Advantage and Conduent.

Diversification Opportunities for First Advantage and Conduent

0.36

Correlation Coefficient

First Advantage  Conduent

Weak diversification

The 3 months correlation between First and Conduent is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding First Advantage Corp and Conduent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Conduent 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 Conduent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Conduent has no effect on the direction of First Advantage i.e., First Advantage and Conduent go up and down completely randomly.

Pair Corralation between First Advantage and Conduent

Allowing for the 90-day total investment horizon First Advantage is expected to generate 1.99 times less return on investment than Conduent. But when comparing it to its historical volatility, First Advantage Corp is 1.91 times less risky than Conduent. It trades about 0.05 of its potential returns per unit of risk. Conduent is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  319.00  in Conduent on September 27, 2024 and sell it today you would earn a total of  96.00  from holding Conduent or generate 30.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.63%
Values	Daily Returns

First Advantage Corp  vs.  Conduent

First Advantage Corp

Risk-Adjusted Performance

0 of 100

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 somewhat strong basic indicators, First Advantage is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Conduent

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Conduent are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Conduent may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with First Advantage and Conduent

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

The idea behind First Advantage Corp and Conduent 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.