Correlation Between Acadia Healthcare and EMPEROR ENT

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Can any of the company-specific risk be diversified away by investing in both Acadia Healthcare and EMPEROR ENT 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 EMPEROR ENT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Acadia Healthcare and EMPEROR ENT HOTEL, you can compare the effects of market volatilities on Acadia Healthcare and EMPEROR ENT 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 EMPEROR ENT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Acadia Healthcare and EMPEROR ENT.

Diversification Opportunities for Acadia Healthcare and EMPEROR ENT

0.34
  Correlation Coefficient

Weak diversification

The 3 months correlation between Acadia and EMPEROR is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Acadia Healthcare and EMPEROR ENT HOTEL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMPEROR ENT HOTEL 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 EMPEROR ENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMPEROR ENT HOTEL has no effect on the direction of Acadia Healthcare i.e., Acadia Healthcare and EMPEROR ENT go up and down completely randomly.

Pair Corralation between Acadia Healthcare and EMPEROR ENT

Assuming the 90 days horizon Acadia Healthcare is expected to under-perform the EMPEROR ENT. But the stock apears to be less risky and, when comparing its historical volatility, Acadia Healthcare is 3.06 times less risky than EMPEROR ENT. The stock trades about -0.03 of its potential returns per unit of risk. The EMPEROR ENT HOTEL is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3.86  in EMPEROR ENT HOTEL on October 27, 2024 and sell it today you would lose (0.61) from holding EMPEROR ENT HOTEL or give up 15.8% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Acadia Healthcare  vs.  EMPEROR ENT HOTEL

 Performance 
       Timeline  
Acadia Healthcare 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
EMPEROR ENT HOTEL 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days EMPEROR ENT HOTEL 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Acadia Healthcare and EMPEROR ENT Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Acadia Healthcare and EMPEROR ENT

The main advantage of trading using opposite Acadia Healthcare and EMPEROR ENT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Acadia Healthcare position performs unexpectedly, EMPEROR ENT 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 EMPEROR ENT will offset losses from the drop in EMPEROR ENT's long position.
The idea behind Acadia Healthcare and EMPEROR ENT HOTEL 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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