Correlation Between ADDUS HOMECARE and Broadridge Financial

Can any of the company-specific risk be diversified away by investing in both ADDUS HOMECARE and Broadridge Financial 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 ADDUS HOMECARE and Broadridge Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ADDUS HOMECARE and Broadridge Financial Solutions, you can compare the effects of market volatilities on ADDUS HOMECARE and Broadridge Financial 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 ADDUS HOMECARE with a short position of Broadridge Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of ADDUS HOMECARE and Broadridge Financial.

Diversification Opportunities for ADDUS HOMECARE and Broadridge Financial

0.16

Correlation Coefficient

ADDUS HOMECARE  Broadridge Financial

Average diversification

The 3 months correlation between ADDUS and Broadridge is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding ADDUS HOMECARE and Broadridge Financial Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadridge Financial and ADDUS HOMECARE 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 ADDUS HOMECARE are associated (or correlated) with Broadridge Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadridge Financial has no effect on the direction of ADDUS HOMECARE i.e., ADDUS HOMECARE and Broadridge Financial go up and down completely randomly.

Pair Corralation between ADDUS HOMECARE and Broadridge Financial

Assuming the 90 days trading horizon ADDUS HOMECARE is expected to under-perform the Broadridge Financial. In addition to that, ADDUS HOMECARE is 2.25 times more volatile than Broadridge Financial Solutions. It trades about -0.19 of its total potential returns per unit of risk. Broadridge Financial Solutions is currently generating about -0.02 per unit of volatility. If you would invest  21,516  in Broadridge Financial Solutions on December 22, 2024 and sell it today you would lose (516.00) from holding Broadridge Financial Solutions or give up 2.4% of portfolio value over 90 days.

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

ADDUS HOMECARE  vs.  Broadridge Financial Solutions

ADDUS HOMECARE

Risk-Adjusted Performance

Very Weak

Over the last 90 days ADDUS HOMECARE 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 basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Broadridge Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Broadridge Financial Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Broadridge Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ADDUS HOMECARE and Broadridge Financial

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

The idea behind ADDUS HOMECARE and Broadridge Financial Solutions 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.