Correlation Between First Advantage and Entergy New

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

Diversification Opportunities for First Advantage and Entergy New

0.04

Correlation Coefficient

First Advantage  Entergy New

Significant diversification

The 3 months correlation between First and Entergy is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding First Advantage Corp and Entergy New Orleans in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy New Orleans 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 Entergy New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy New Orleans has no effect on the direction of First Advantage i.e., First Advantage and Entergy New go up and down completely randomly.

Pair Corralation between First Advantage and Entergy New

Allowing for the 90-day total investment horizon First Advantage Corp is expected to under-perform the Entergy New. In addition to that, First Advantage is 1.5 times more volatile than Entergy New Orleans. It trades about -0.42 of its total potential returns per unit of risk. Entergy New Orleans is currently generating about -0.2 per unit of volatility. If you would invest  2,302  in Entergy New Orleans on October 13, 2024 and sell it today you would lose (75.00) from holding Entergy New Orleans or give up 3.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

First Advantage Corp  vs.  Entergy New Orleans

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.

Entergy New Orleans

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Entergy New Orleans has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic 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 Entergy New

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

The idea behind First Advantage Corp and Entergy New Orleans 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.