Correlation Between Acadia Healthcare and SBM OFFSHORE

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

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

Diversification Opportunities for Acadia Healthcare and SBM OFFSHORE

-0.31

Correlation Coefficient

Acadia Healthcare  SBM OFFSHORE

Very good diversification

The 3 months correlation between Acadia and SBM is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Acadia Healthcare and SBM OFFSHORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM OFFSHORE 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 SBM OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBM OFFSHORE has no effect on the direction of Acadia Healthcare i.e., Acadia Healthcare and SBM OFFSHORE go up and down completely randomly.

Pair Corralation between Acadia Healthcare and SBM OFFSHORE

Assuming the 90 days horizon Acadia Healthcare is expected to generate 1.76 times more return on investment than SBM OFFSHORE. However, Acadia Healthcare is 1.76 times more volatile than SBM OFFSHORE. It trades about 0.16 of its potential returns per unit of risk. SBM OFFSHORE is currently generating about -0.06 per unit of risk. If you would invest  3,780  in Acadia Healthcare on October 11, 2024 and sell it today you would earn a total of  660.00  from holding Acadia Healthcare or generate 17.46% 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.  SBM OFFSHORE

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.

SBM OFFSHORE

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SBM OFFSHORE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, SBM OFFSHORE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Acadia Healthcare and SBM OFFSHORE

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

The idea behind Acadia Healthcare and SBM OFFSHORE 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 Global Correlations module to find global opportunities by holding instruments from different markets.