Correlation Between Thomson Reuters and First Advantage
Can any of the company-specific risk be diversified away by investing in both Thomson Reuters 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 Thomson Reuters and First Advantage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Thomson Reuters Corp and First Advantage Corp, you can compare the effects of market volatilities on Thomson Reuters 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 Thomson Reuters with a short position of First Advantage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thomson Reuters and First Advantage.
Diversification Opportunities for Thomson Reuters and First Advantage
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Thomson and First is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Thomson Reuters Corp 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 Thomson Reuters 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 Thomson Reuters Corp 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 Thomson Reuters i.e., Thomson Reuters and First Advantage go up and down completely randomly.
Pair Corralation between Thomson Reuters and First Advantage
Considering the 90-day investment horizon Thomson Reuters Corp is expected to under-perform the First Advantage. But the stock apears to be less risky and, when comparing its historical volatility, Thomson Reuters Corp is 1.9 times less risky than First Advantage. The stock trades about -0.08 of its potential returns per unit of risk. The First Advantage Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,870 in First Advantage Corp on August 31, 2024 and sell it today you would earn a total of 58.00 from holding First Advantage Corp or generate 3.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Thomson Reuters Corp vs. First Advantage Corp
Performance |
| Timeline |
| Thomson Reuters Corp |
| First Advantage Corp |
Thomson Reuters and First Advantage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Thomson Reuters and First Advantage
The main advantage of trading using opposite Thomson Reuters and First Advantage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thomson Reuters 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.| Thomson Reuters vs. Rentokil Initial PLC | Thomson Reuters vs. Performant Financial | Thomson Reuters vs. Cass Information Systems | Thomson Reuters vs. Maximus |
| First Advantage vs. Discount Print USA | First Advantage vs. Cass Information Systems | First Advantage vs. Civeo Corp | First Advantage vs. Network 1 Technologies |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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