Correlation Between Acadia Healthcare and Akamai Technologies

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

By analyzing existing cross correlation between Acadia Healthcare and Akamai Technologies, you can compare the effects of market volatilities on Acadia Healthcare and Akamai Technologies 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 Akamai Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Acadia Healthcare and Akamai Technologies.

Diversification Opportunities for Acadia Healthcare and Akamai Technologies

0.49

Correlation Coefficient

Acadia Healthcare  Akamai Technologies

Very weak diversification

The 3 months correlation between Acadia and Akamai is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Acadia Healthcare and Akamai Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Akamai Technologies 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 Akamai Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Akamai Technologies has no effect on the direction of Acadia Healthcare i.e., Acadia Healthcare and Akamai Technologies go up and down completely randomly.

Pair Corralation between Acadia Healthcare and Akamai Technologies

Assuming the 90 days horizon Acadia Healthcare is expected to under-perform the Akamai Technologies. In addition to that, Acadia Healthcare is 1.37 times more volatile than Akamai Technologies. It trades about -0.04 of its total potential returns per unit of risk. Akamai Technologies is currently generating about -0.01 per unit of volatility. If you would invest  9,485  in Akamai Technologies on October 26, 2024 and sell it today you would lose (346.00) from holding Akamai Technologies or give up 3.65% of portfolio value over 90 days.

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

Acadia Healthcare  vs.  Akamai Technologies

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 fragile 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.

Akamai Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Akamai Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Akamai Technologies is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Acadia Healthcare and Akamai Technologies

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

The idea behind Acadia Healthcare and Akamai Technologies 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.