Correlation Between First Advantage and Trex
Can any of the company-specific risk be diversified away by investing in both First Advantage and Trex 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 Trex 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 Trex Company, you can compare the effects of market volatilities on First Advantage and Trex 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 Trex. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Advantage and Trex.
Diversification Opportunities for First Advantage and Trex
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and Trex is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding First Advantage Corp and Trex Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trex Company 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 Trex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trex Company has no effect on the direction of First Advantage i.e., First Advantage and Trex go up and down completely randomly.
Pair Corralation between First Advantage and Trex
Allowing for the 90-day total investment horizon First Advantage Corp is expected to generate 1.2 times more return on investment than Trex. However, First Advantage is 1.2 times more volatile than Trex Company. It trades about 0.17 of its potential returns per unit of risk. Trex Company is currently generating about 0.19 per unit of risk. If you would invest 1,754 in First Advantage Corp on August 27, 2024 and sell it today you would earn a total of 156.00 from holding First Advantage Corp or generate 8.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Advantage Corp vs. Trex Company
Performance |
| Timeline |
| First Advantage Corp |
| Trex Company |
First Advantage and Trex Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Advantage and Trex
The main advantage of trading using opposite First Advantage and Trex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Advantage position performs unexpectedly, Trex 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 Trex will offset losses from the drop in Trex's long position.| First Advantage vs. Discount Print USA | First Advantage vs. Cass Information Systems | First Advantage vs. Civeo Corp | First Advantage vs. Network 1 Technologies |
| Trex vs. Quanex Building Products | Trex vs. Armstrong World Industries | Trex vs. Gibraltar Industries | Trex vs. Apogee Enterprises |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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