Correlation Between Maximus and First Advantage

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

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

Diversification Opportunities for Maximus and First Advantage

-0.55

Correlation Coefficient

Maximus  First Advantage

Excellent diversification

The 3 months correlation between Maximus and First is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Maximus and First Advantage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Advantage Corp and Maximus 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 Maximus are associated (or correlated) with First Advantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Advantage Corp has no effect on the direction of Maximus i.e., Maximus and First Advantage go up and down completely randomly.

Pair Corralation between Maximus and First Advantage

Considering the 90-day investment horizon Maximus is expected to under-perform the First Advantage. But the stock apears to be less risky and, when comparing its historical volatility, Maximus is 1.01 times less risky than First Advantage. The stock trades about -0.09 of its potential returns per unit of risk. The First Advantage Corp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,923  in First Advantage Corp on November 28, 2024 and sell it today you would lose (41.00) from holding First Advantage Corp or give up 2.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Maximus  vs.  First Advantage Corp

Maximus

Risk-Adjusted Performance

Very Weak

Over the last 90 days Maximus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 somewhat strong basic indicators, First Advantage is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Maximus and First Advantage

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

The idea behind Maximus and First Advantage 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.