Correlation Between First Advantage and Thomson Reuters

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

Diversification Opportunities for First Advantage and Thomson Reuters

0.44

Correlation Coefficient

First Advantage  Thomson Reuters

Very weak diversification

The 3 months correlation between First and Thomson is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding First Advantage Corp and Thomson Reuters Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thomson Reuters Corp 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 Thomson Reuters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thomson Reuters Corp has no effect on the direction of First Advantage i.e., First Advantage and Thomson Reuters go up and down completely randomly.

Pair Corralation between First Advantage and Thomson Reuters

Allowing for the 90-day total investment horizon First Advantage Corp is expected to under-perform the Thomson Reuters. In addition to that, First Advantage is 1.96 times more volatile than Thomson Reuters Corp. It trades about -0.1 of its total potential returns per unit of risk. Thomson Reuters Corp is currently generating about -0.11 per unit of volatility. If you would invest  16,670  in Thomson Reuters Corp on October 12, 2024 and sell it today you would lose (1,161) from holding Thomson Reuters Corp or give up 6.96% 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.  Thomson Reuters Corp

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 abnormal performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Thomson Reuters Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thomson Reuters Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with First Advantage and Thomson Reuters

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

The idea behind First Advantage Corp and Thomson Reuters Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.