Correlation Between First Advantage and Forrester Research

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

Diversification Opportunities for First Advantage and Forrester Research

0.52

Correlation Coefficient

First Advantage  Forrester Research

Very weak diversification

The 3 months correlation between First and Forrester is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding First Advantage Corp and Forrester Research in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forrester Research 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 Forrester Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forrester Research has no effect on the direction of First Advantage i.e., First Advantage and Forrester Research go up and down completely randomly.

Pair Corralation between First Advantage and Forrester Research

Allowing for the 90-day total investment horizon First Advantage Corp is expected to generate 0.9 times more return on investment than Forrester Research. However, First Advantage Corp is 1.11 times less risky than Forrester Research. It trades about -0.29 of its potential returns per unit of risk. Forrester Research is currently generating about -0.32 per unit of risk. If you would invest  1,989  in First Advantage Corp on September 24, 2024 and sell it today you would lose (154.00) from holding First Advantage Corp or give up 7.74% 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.  Forrester Research

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.

Forrester Research

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Forrester Research has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with First Advantage and Forrester Research

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

The idea behind First Advantage Corp and Forrester Research 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.