Correlation Between First Advantage and Team

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

Diversification Opportunities for First Advantage and Team

0.17

Correlation Coefficient

First Advantage  Team

Average diversification

The 3 months correlation between First and Team is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding First Advantage Corp and Team Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Team Inc 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 Team. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Team Inc has no effect on the direction of First Advantage i.e., First Advantage and Team go up and down completely randomly.

Pair Corralation between First Advantage and Team

Allowing for the 90-day total investment horizon First Advantage is expected to generate 15.2 times less return on investment than Team. But when comparing it to its historical volatility, First Advantage Corp is 4.36 times less risky than Team. It trades about 0.02 of its potential returns per unit of risk. Team Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,371  in Team Inc on September 2, 2024 and sell it today you would earn a total of  317.00  from holding Team Inc or generate 23.12% 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.  Team Inc

First Advantage Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Advantage Corp are ranked lower than 1 (%) 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.

Team Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Team Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Team demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Advantage and Team

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

The idea behind First Advantage Corp and Team Inc 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.