Correlation Between First Advantage and MSA Safety

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

Diversification Opportunities for First Advantage and MSA Safety

0.62

Correlation Coefficient

First Advantage  MSA Safety

Poor diversification

The 3 months correlation between First and MSA is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding First Advantage Corp and MSA Safety in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSA Safety 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 MSA Safety. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSA Safety has no effect on the direction of First Advantage i.e., First Advantage and MSA Safety go up and down completely randomly.

Pair Corralation between First Advantage and MSA Safety

Allowing for the 90-day total investment horizon First Advantage Corp is expected to generate 1.21 times more return on investment than MSA Safety. However, First Advantage is 1.21 times more volatile than MSA Safety. It trades about 0.07 of its potential returns per unit of risk. MSA Safety is currently generating about 0.04 per unit of risk. If you would invest  1,139  in First Advantage Corp on September 17, 2024 and sell it today you would earn a total of  795.00  from holding First Advantage Corp or generate 69.8% return on investment over 90 days.

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

First Advantage Corp  vs.  MSA Safety

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.

MSA Safety

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MSA Safety has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MSA Safety is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Advantage and MSA Safety

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

The idea behind First Advantage Corp and MSA Safety 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.