Correlation Between First Advantage and Mistras

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

Diversification Opportunities for First Advantage and Mistras

0.46

Correlation Coefficient

First Advantage  Mistras

Very weak diversification

The 3 months correlation between First and Mistras is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding First Advantage Corp and Mistras Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mistras Group 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 Mistras. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mistras Group has no effect on the direction of First Advantage i.e., First Advantage and Mistras go up and down completely randomly.

Pair Corralation between First Advantage and Mistras

Allowing for the 90-day total investment horizon First Advantage Corp is expected to generate 1.11 times more return on investment than Mistras. However, First Advantage is 1.11 times more volatile than Mistras Group. It trades about -0.09 of its potential returns per unit of risk. Mistras Group is currently generating about -0.13 per unit of risk. If you would invest  1,910  in First Advantage Corp on September 23, 2024 and sell it today you would lose (62.00) from holding First Advantage Corp or give up 3.25% 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.  Mistras Group

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

Mistras Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mistras Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with First Advantage and Mistras

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

The idea behind First Advantage Corp and Mistras Group 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.