Correlation Between Cofina SGPS and ADDUS HOMECARE

Can any of the company-specific risk be diversified away by investing in both Cofina SGPS and ADDUS HOMECARE 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 Cofina SGPS and ADDUS HOMECARE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cofina SGPS SA and ADDUS HOMECARE, you can compare the effects of market volatilities on Cofina SGPS and ADDUS HOMECARE 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 Cofina SGPS with a short position of ADDUS HOMECARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cofina SGPS and ADDUS HOMECARE.

Diversification Opportunities for Cofina SGPS and ADDUS HOMECARE

0.58

Correlation Coefficient

Cofina SGPS  ADDUS HOMECARE

Very weak diversification

The 3 months correlation between Cofina and ADDUS is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Cofina SGPS SA and ADDUS HOMECARE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADDUS HOMECARE and Cofina SGPS 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 Cofina SGPS SA are associated (or correlated) with ADDUS HOMECARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADDUS HOMECARE has no effect on the direction of Cofina SGPS i.e., Cofina SGPS and ADDUS HOMECARE go up and down completely randomly.

Pair Corralation between Cofina SGPS and ADDUS HOMECARE

Assuming the 90 days horizon Cofina SGPS SA is expected to under-perform the ADDUS HOMECARE. In addition to that, Cofina SGPS is 4.43 times more volatile than ADDUS HOMECARE. It trades about -0.09 of its total potential returns per unit of risk. ADDUS HOMECARE is currently generating about -0.2 per unit of volatility. If you would invest  12,600  in ADDUS HOMECARE on December 20, 2024 and sell it today you would lose (4,200) from holding ADDUS HOMECARE or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Cofina SGPS SA  vs.  ADDUS HOMECARE

Cofina SGPS SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cofina SGPS SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

ADDUS HOMECARE

Risk-Adjusted Performance

Very Weak

Over the last 90 days ADDUS HOMECARE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Cofina SGPS and ADDUS HOMECARE

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

The idea behind Cofina SGPS SA and ADDUS HOMECARE 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.