Correlation Between First Advantage and ExlService Holdings

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

Diversification Opportunities for First Advantage and ExlService Holdings

-0.17

Correlation Coefficient

First Advantage  ExlService Holdings

Good diversification

The 3 months correlation between First and ExlService is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding First Advantage Corp and ExlService Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ExlService Holdings 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 ExlService Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ExlService Holdings has no effect on the direction of First Advantage i.e., First Advantage and ExlService Holdings go up and down completely randomly.

Pair Corralation between First Advantage and ExlService Holdings

Allowing for the 90-day total investment horizon First Advantage Corp is expected to under-perform the ExlService Holdings. In addition to that, First Advantage is 1.33 times more volatile than ExlService Holdings. It trades about -0.22 of its total potential returns per unit of risk. ExlService Holdings is currently generating about -0.15 per unit of volatility. If you would invest  4,677  in ExlService Holdings on September 26, 2024 and sell it today you would lose (149.00) from holding ExlService Holdings or give up 3.19% of portfolio value over 90 days.

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

First Advantage Corp  vs.  ExlService Holdings

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 latest stock price disturbance, may contribute to short-term losses for the investors.

ExlService Holdings

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ExlService Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, ExlService Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Advantage and ExlService Holdings

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

The idea behind First Advantage Corp and ExlService Holdings 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.