Correlation Between First Advantage and Exponent

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

Diversification Opportunities for First Advantage and Exponent

0.8

Correlation Coefficient

First Advantage  Exponent

Very poor diversification

The 3 months correlation between First and Exponent is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding First Advantage Corp and Exponent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exponent 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 Exponent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exponent has no effect on the direction of First Advantage i.e., First Advantage and Exponent go up and down completely randomly.

Pair Corralation between First Advantage and Exponent

Allowing for the 90-day total investment horizon First Advantage Corp is expected to under-perform the Exponent. In addition to that, First Advantage is 2.12 times more volatile than Exponent. It trades about -0.15 of its total potential returns per unit of risk. Exponent is currently generating about -0.09 per unit of volatility. If you would invest  8,862  in Exponent on December 28, 2024 and sell it today you would lose (658.00) from holding Exponent or give up 7.42% of portfolio value over 90 days.

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

First Advantage Corp  vs.  Exponent

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

Exponent

Risk-Adjusted Performance

Very Weak

Over the last 90 days Exponent 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 Exponent

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

The idea behind First Advantage Corp and Exponent 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.