Correlation Between First Advantage and CoreCivic

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

Diversification Opportunities for First Advantage and CoreCivic

-0.45

Correlation Coefficient

First Advantage  CoreCivic

Very good diversification

The 3 months correlation between First and CoreCivic is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding First Advantage Corp and CoreCivic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CoreCivic 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 CoreCivic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CoreCivic has no effect on the direction of First Advantage i.e., First Advantage and CoreCivic go up and down completely randomly.

Pair Corralation between First Advantage and CoreCivic

Allowing for the 90-day total investment horizon First Advantage Corp is expected to under-perform the CoreCivic. In addition to that, First Advantage is 1.09 times more volatile than CoreCivic. It trades about -0.04 of its total potential returns per unit of risk. CoreCivic is currently generating about 0.06 per unit of volatility. If you would invest  1,426  in CoreCivic on February 20, 2024 and sell it today you would earn a total of  77.00  from holding CoreCivic or generate 5.4% return on investment over 90 days.

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

First Advantage Corp  vs.  CoreCivic

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

CoreCivic

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CoreCivic are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, CoreCivic is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with First Advantage and CoreCivic

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

The idea behind First Advantage Corp and CoreCivic 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.