Correlation Between First Advantage and Argosy Minerals

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

Diversification Opportunities for First Advantage and Argosy Minerals

-0.31

Correlation Coefficient

First Advantage  Argosy Minerals

Very good diversification

The 3 months correlation between First and Argosy is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding First Advantage Corp and Argosy Minerals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Argosy Minerals 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 Argosy Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Argosy Minerals has no effect on the direction of First Advantage i.e., First Advantage and Argosy Minerals go up and down completely randomly.

Pair Corralation between First Advantage and Argosy Minerals

Allowing for the 90-day total investment horizon First Advantage Corp is expected to generate 0.24 times more return on investment than Argosy Minerals. However, First Advantage Corp is 4.12 times less risky than Argosy Minerals. It trades about 0.06 of its potential returns per unit of risk. Argosy Minerals Limited is currently generating about -0.05 per unit of risk. If you would invest  1,241  in First Advantage Corp on February 28, 2024 and sell it today you would earn a total of  407.00  from holding First Advantage Corp or generate 32.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.68%
Values	Daily Returns

First Advantage Corp  vs.  Argosy Minerals Limited

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

Argosy Minerals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Argosy Minerals Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Argosy Minerals may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with First Advantage and Argosy Minerals

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

The idea behind First Advantage Corp and Argosy Minerals Limited 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.