Correlation Between First Advantage and ManpowerGroup

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

Diversification Opportunities for First Advantage and ManpowerGroup

0.71

Correlation Coefficient

First Advantage  ManpowerGroup

Poor diversification

The 3 months correlation between First and ManpowerGroup is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding First Advantage Corp and ManpowerGroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ManpowerGroup 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 ManpowerGroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ManpowerGroup has no effect on the direction of First Advantage i.e., First Advantage and ManpowerGroup go up and down completely randomly.

Pair Corralation between First Advantage and ManpowerGroup

Allowing for the 90-day total investment horizon First Advantage Corp is expected to generate 0.93 times more return on investment than ManpowerGroup. However, First Advantage Corp is 1.08 times less risky than ManpowerGroup. It trades about 0.02 of its potential returns per unit of risk. ManpowerGroup is currently generating about -0.08 per unit of risk. If you would invest  1,891  in First Advantage Corp on September 1, 2024 and sell it today you would earn a total of  32.00  from holding First Advantage Corp or generate 1.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

First Advantage Corp  vs.  ManpowerGroup

First Advantage Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Advantage Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

ManpowerGroup

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ManpowerGroup has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with First Advantage and ManpowerGroup

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

The idea behind First Advantage Corp and ManpowerGroup 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.