Correlation Between FTI Consulting and Equifax

Can any of the company-specific risk be diversified away by investing in both FTI Consulting and Equifax 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 FTI Consulting and Equifax into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FTI Consulting and Equifax, you can compare the effects of market volatilities on FTI Consulting and Equifax 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 FTI Consulting with a short position of Equifax. Check out your portfolio center. Please also check ongoing floating volatility patterns of FTI Consulting and Equifax.

Diversification Opportunities for FTI Consulting and Equifax

0.82

Correlation Coefficient

FTI Consulting  Equifax

Very poor diversification

The 3 months correlation between FTI and Equifax is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding FTI Consulting and Equifax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equifax and FTI Consulting 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 FTI Consulting are associated (or correlated) with Equifax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equifax has no effect on the direction of FTI Consulting i.e., FTI Consulting and Equifax go up and down completely randomly.

Pair Corralation between FTI Consulting and Equifax

Considering the 90-day investment horizon FTI Consulting is expected to generate 1.18 times more return on investment than Equifax. However, FTI Consulting is 1.18 times more volatile than Equifax. It trades about -0.07 of its potential returns per unit of risk. Equifax is currently generating about -0.14 per unit of risk. If you would invest  22,252  in FTI Consulting on September 3, 2024 and sell it today you would lose (2,000) from holding FTI Consulting or give up 8.99% of portfolio value over 90 days.

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

FTI Consulting  vs.  Equifax

FTI Consulting

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FTI Consulting has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Equifax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equifax has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with FTI Consulting and Equifax

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

The idea behind FTI Consulting and Equifax 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.