Correlation Between First Advantage and Insperity

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

Diversification Opportunities for First Advantage and Insperity

0.08

Correlation Coefficient

First Advantage  Insperity

Significant diversification

The 3 months correlation between First and Insperity is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding First Advantage Corp and Insperity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insperity 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 Insperity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insperity has no effect on the direction of First Advantage i.e., First Advantage and Insperity go up and down completely randomly.

Pair Corralation between First Advantage and Insperity

Allowing for the 90-day total investment horizon First Advantage Corp is expected to under-perform the Insperity. But the stock apears to be less risky and, when comparing its historical volatility, First Advantage Corp is 1.19 times less risky than Insperity. The stock trades about -0.16 of its potential returns per unit of risk. The Insperity is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  8,074  in Insperity on December 1, 2024 and sell it today you would earn a total of  723.00  from holding Insperity or generate 8.95% return on investment over 90 days.

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

First Advantage Corp  vs.  Insperity

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.

Insperity

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Insperity are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Insperity may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with First Advantage and Insperity

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

The idea behind First Advantage Corp and Insperity 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.