Correlation Between First Advantage and Kingsoft Cloud

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

Diversification Opportunities for First Advantage and Kingsoft Cloud

-0.07

Correlation Coefficient

First Advantage  Kingsoft Cloud

Good diversification

The 3 months correlation between First and Kingsoft is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding First Advantage Corp and Kingsoft Cloud Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingsoft Cloud 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 Kingsoft Cloud. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingsoft Cloud Holdings has no effect on the direction of First Advantage i.e., First Advantage and Kingsoft Cloud go up and down completely randomly.

Pair Corralation between First Advantage and Kingsoft Cloud

Allowing for the 90-day total investment horizon First Advantage is expected to generate 28.44 times less return on investment than Kingsoft Cloud. But when comparing it to its historical volatility, First Advantage Corp is 5.24 times less risky than Kingsoft Cloud. It trades about 0.04 of its potential returns per unit of risk. Kingsoft Cloud Holdings is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  216.00  in Kingsoft Cloud Holdings on September 5, 2024 and sell it today you would earn a total of  536.00  from holding Kingsoft Cloud Holdings or generate 248.15% return on investment over 90 days.

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

First Advantage Corp  vs.  Kingsoft Cloud Holdings

First Advantage Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Advantage Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, First Advantage is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Kingsoft Cloud Holdings

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kingsoft Cloud Holdings are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Kingsoft Cloud exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Advantage and Kingsoft Cloud

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

The idea behind First Advantage Corp and Kingsoft Cloud 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.