Correlation Between Acadia Healthcare and NIGHTINGALE HEALTH

Can any of the company-specific risk be diversified away by investing in both Acadia Healthcare and NIGHTINGALE HEALTH 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 Acadia Healthcare and NIGHTINGALE HEALTH into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Acadia Healthcare and NIGHTINGALE HEALTH EO, you can compare the effects of market volatilities on Acadia Healthcare and NIGHTINGALE HEALTH 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 Acadia Healthcare with a short position of NIGHTINGALE HEALTH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Acadia Healthcare and NIGHTINGALE HEALTH.

Diversification Opportunities for Acadia Healthcare and NIGHTINGALE HEALTH

0.33

Correlation Coefficient

Acadia Healthcare  NIGHTINGALE HEALTH

Weak diversification

The 3 months correlation between Acadia and NIGHTINGALE is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Acadia Healthcare and NIGHTINGALE HEALTH EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIGHTINGALE HEALTH and Acadia Healthcare 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 Acadia Healthcare are associated (or correlated) with NIGHTINGALE HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIGHTINGALE HEALTH has no effect on the direction of Acadia Healthcare i.e., Acadia Healthcare and NIGHTINGALE HEALTH go up and down completely randomly.

Pair Corralation between Acadia Healthcare and NIGHTINGALE HEALTH

Assuming the 90 days horizon Acadia Healthcare is expected to under-perform the NIGHTINGALE HEALTH. But the stock apears to be less risky and, when comparing its historical volatility, Acadia Healthcare is 1.67 times less risky than NIGHTINGALE HEALTH. The stock trades about -0.03 of its potential returns per unit of risk. The NIGHTINGALE HEALTH EO is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  104.00  in NIGHTINGALE HEALTH EO on October 11, 2024 and sell it today you would earn a total of  201.00  from holding NIGHTINGALE HEALTH EO or generate 193.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Acadia Healthcare  vs.  NIGHTINGALE HEALTH EO

Acadia Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acadia Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

NIGHTINGALE HEALTH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NIGHTINGALE HEALTH EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, NIGHTINGALE HEALTH is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Acadia Healthcare and NIGHTINGALE HEALTH

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

The idea behind Acadia Healthcare and NIGHTINGALE HEALTH EO 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.