Correlation Between First Advantage and Equifax

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

Diversification Opportunities for First Advantage and Equifax

0.56

Correlation Coefficient

First Advantage  Equifax

Very weak diversification

The 3 months correlation between First and Equifax is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding First Advantage Corp and Equifax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equifax 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 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 First Advantage i.e., First Advantage and Equifax go up and down completely randomly.

Pair Corralation between First Advantage and Equifax

Allowing for the 90-day total investment horizon First Advantage Corp is expected to under-perform the Equifax. But the stock apears to be less risky and, when comparing its historical volatility, First Advantage Corp is 1.4 times less risky than Equifax. The stock trades about -0.44 of its potential returns per unit of risk. The Equifax is currently generating about -0.22 of returns per unit of risk over similar time horizon. If you would invest  26,529  in Equifax on October 13, 2024 and sell it today you would lose (2,094) from holding Equifax or give up 7.89% 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.  Equifax

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 abnormal performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company 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 conflicting performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with First Advantage and Equifax

The main advantage of trading using opposite First Advantage and Equifax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Advantage 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 First Advantage Corp 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.