Correlation Between Acadia Healthcare and FEMALE HEALTH

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

Diversification Opportunities for Acadia Healthcare and FEMALE HEALTH

0.61

Correlation Coefficient

Acadia Healthcare  FEMALE HEALTH

Poor diversification

The 3 months correlation between Acadia and FEMALE is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Acadia Healthcare and FEMALE HEALTH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FEMALE 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 FEMALE HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FEMALE HEALTH has no effect on the direction of Acadia Healthcare i.e., Acadia Healthcare and FEMALE HEALTH go up and down completely randomly.

Pair Corralation between Acadia Healthcare and FEMALE HEALTH

Assuming the 90 days horizon Acadia Healthcare is expected to under-perform the FEMALE HEALTH. But the stock apears to be less risky and, when comparing its historical volatility, Acadia Healthcare is 1.74 times less risky than FEMALE HEALTH. The stock trades about -0.04 of its potential returns per unit of risk. The FEMALE HEALTH is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  76.00  in FEMALE HEALTH on October 26, 2024 and sell it today you would earn a total of  25.00  from holding FEMALE HEALTH or generate 32.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Acadia Healthcare  vs.  FEMALE HEALTH

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.

FEMALE HEALTH

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FEMALE HEALTH are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, FEMALE HEALTH exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Acadia Healthcare and FEMALE HEALTH

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

The idea behind Acadia Healthcare and FEMALE HEALTH 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.