Correlation Between Acadia Healthcare and Garofalo Health

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

Diversification Opportunities for Acadia Healthcare and Garofalo Health

-0.12

Correlation Coefficient

Acadia Healthcare  Garofalo Health

Good diversification

The 3 months correlation between Acadia and Garofalo is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Acadia Healthcare and Garofalo Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garofalo Health Care 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 Garofalo Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garofalo Health Care has no effect on the direction of Acadia Healthcare i.e., Acadia Healthcare and Garofalo Health go up and down completely randomly.

Pair Corralation between Acadia Healthcare and Garofalo Health

Assuming the 90 days horizon Acadia Healthcare is expected to under-perform the Garofalo Health. In addition to that, Acadia Healthcare is 1.64 times more volatile than Garofalo Health Care. It trades about -0.03 of its total potential returns per unit of risk. Garofalo Health Care is currently generating about 0.05 per unit of volatility. If you would invest  381.00  in Garofalo Health Care on October 26, 2024 and sell it today you would earn a total of  127.00  from holding Garofalo Health Care or generate 33.33% return on investment over 90 days.

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

Acadia Healthcare  vs.  Garofalo Health Care

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.

Garofalo Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Garofalo Health Care 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.

Pair Trading with Acadia Healthcare and Garofalo Health

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

The idea behind Acadia Healthcare and Garofalo Health Care 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.