Correlation Between E Home and First Advantage

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

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

Diversification Opportunities for E Home and First Advantage

-0.14

Correlation Coefficient

E Home  First Advantage

Good diversification

The 3 months correlation between EJH and First is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding E Home Household Service 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 E Home 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 E Home Household Service 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 E Home i.e., E Home and First Advantage go up and down completely randomly.

Pair Corralation between E Home and First Advantage

Considering the 90-day investment horizon E Home Household Service is expected to under-perform the First Advantage. In addition to that, E Home is 6.17 times more volatile than First Advantage Corp. It trades about -0.02 of its total potential returns per unit of risk. First Advantage Corp is currently generating about 0.07 per unit of volatility. If you would invest  1,150  in First Advantage Corp on January 20, 2024 and sell it today you would earn a total of  336.00  from holding First Advantage Corp or generate 29.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

E Home Household Service  vs.  First Advantage Corp

E Home Household

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in E Home Household Service are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile forward-looking indicators, E Home demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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 latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with E Home and First Advantage

The main advantage of trading using opposite E Home and First Advantage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E Home 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 E Home Household Service 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.

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 Stocks Directory module to find actively traded stocks across global markets.