Correlation Between First Advantage and VCI Global

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

Diversification Opportunities for First Advantage and VCI Global

0.41

Correlation Coefficient

First Advantage  VCI Global

Very weak diversification

The 3 months correlation between First and VCI is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding First Advantage Corp and VCI Global Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VCI Global Limited 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 VCI Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VCI Global Limited has no effect on the direction of First Advantage i.e., First Advantage and VCI Global go up and down completely randomly.

Pair Corralation between First Advantage and VCI Global

Allowing for the 90-day total investment horizon First Advantage is expected to generate 5.06 times less return on investment than VCI Global. But when comparing it to its historical volatility, First Advantage Corp is 17.23 times less risky than VCI Global. It trades about 0.06 of its potential returns per unit of risk. VCI Global Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  20,824  in VCI Global Limited on September 28, 2024 and sell it today you would lose (20,637) from holding VCI Global Limited or give up 99.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	86.87%
Values	Daily Returns

First Advantage Corp  vs.  VCI Global Limited

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

VCI Global Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VCI Global Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward 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 VCI Global

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

The idea behind First Advantage Corp and VCI Global Limited 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.