Correlation Between First Advantage and Cintas

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

Diversification Opportunities for First Advantage and Cintas

0.51

Correlation Coefficient

First Advantage  Cintas

Very weak diversification

The 3 months correlation between First and Cintas is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding First Advantage Corp and Cintas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cintas 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 Cintas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cintas has no effect on the direction of First Advantage i.e., First Advantage and Cintas go up and down completely randomly.

Pair Corralation between First Advantage and Cintas

Allowing for the 90-day total investment horizon First Advantage Corp is expected to generate 0.82 times more return on investment than Cintas. However, First Advantage Corp is 1.22 times less risky than Cintas. It trades about -0.01 of its potential returns per unit of risk. Cintas is currently generating about -0.07 per unit of risk. If you would invest  1,923  in First Advantage Corp on November 28, 2024 and sell it today you would lose (41.00) from holding First Advantage Corp or give up 2.13% of portfolio value over 90 days.

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

First Advantage Corp  vs.  Cintas

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

Cintas

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cintas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with First Advantage and Cintas

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

The idea behind First Advantage Corp and Cintas 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.