Correlation Between First Advantage and Werner Enterprises

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

Diversification Opportunities for First Advantage and Werner Enterprises

-0.32

Correlation Coefficient

First Advantage  Werner Enterprises

Very good diversification

The 3 months correlation between First and Werner is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding First Advantage Corp and Werner Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Werner Enterprises 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 Werner Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Werner Enterprises has no effect on the direction of First Advantage i.e., First Advantage and Werner Enterprises go up and down completely randomly.

Pair Corralation between First Advantage and Werner Enterprises

Allowing for the 90-day total investment horizon First Advantage is expected to generate 3.18 times less return on investment than Werner Enterprises. In addition to that, First Advantage is 1.04 times more volatile than Werner Enterprises. It trades about 0.03 of its total potential returns per unit of risk. Werner Enterprises is currently generating about 0.1 per unit of volatility. If you would invest  3,706  in Werner Enterprises on September 4, 2024 and sell it today you would earn a total of  388.00  from holding Werner Enterprises or generate 10.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

First Advantage Corp  vs.  Werner Enterprises

First Advantage Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Advantage Corp are ranked lower than 2 (%) 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.

Werner Enterprises

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Werner Enterprises are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Werner Enterprises may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with First Advantage and Werner Enterprises

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

The idea behind First Advantage Corp and Werner Enterprises 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.