Correlation Between ADDUS HOMECARE and CAIRN HOMES

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

By analyzing existing cross correlation between ADDUS HOMECARE and CAIRN HOMES EO, you can compare the effects of market volatilities on ADDUS HOMECARE and CAIRN HOMES 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 CAIRN HOMES. Check out your portfolio center. Please also check ongoing floating volatility patterns of ADDUS HOMECARE and CAIRN HOMES.

Diversification Opportunities for ADDUS HOMECARE and CAIRN HOMES

0.49

Correlation Coefficient

ADDUS HOMECARE  CAIRN HOMES

Very weak diversification

The 3 months correlation between ADDUS and CAIRN is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding ADDUS HOMECARE and CAIRN HOMES EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAIRN HOMES EO 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 CAIRN HOMES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAIRN HOMES EO has no effect on the direction of ADDUS HOMECARE i.e., ADDUS HOMECARE and CAIRN HOMES go up and down completely randomly.

Pair Corralation between ADDUS HOMECARE and CAIRN HOMES

Assuming the 90 days trading horizon ADDUS HOMECARE is expected to under-perform the CAIRN HOMES. In addition to that, ADDUS HOMECARE is 1.45 times more volatile than CAIRN HOMES EO. It trades about -0.2 of its total potential returns per unit of risk. CAIRN HOMES EO is currently generating about -0.08 per unit of volatility. If you would invest  226.00  in CAIRN HOMES EO on December 20, 2024 and sell it today you would lose (25.00) from holding CAIRN HOMES EO or give up 11.06% of portfolio value over 90 days.

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

ADDUS HOMECARE  vs.  CAIRN HOMES EO

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.

CAIRN HOMES EO

Risk-Adjusted Performance

Very Weak

Over the last 90 days CAIRN HOMES EO 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 ADDUS HOMECARE and CAIRN HOMES

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

The idea behind ADDUS HOMECARE and CAIRN HOMES EO 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.