Correlation Between ADDUS HOMECARE and MUTUIONLINE

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

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

Diversification Opportunities for ADDUS HOMECARE and MUTUIONLINE

0.27

Correlation Coefficient

ADDUS HOMECARE  MUTUIONLINE

Modest diversification

The 3 months correlation between ADDUS and MUTUIONLINE is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding ADDUS HOMECARE and MUTUIONLINE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MUTUIONLINE 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 MUTUIONLINE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MUTUIONLINE has no effect on the direction of ADDUS HOMECARE i.e., ADDUS HOMECARE and MUTUIONLINE go up and down completely randomly.

Pair Corralation between ADDUS HOMECARE and MUTUIONLINE

Assuming the 90 days trading horizon ADDUS HOMECARE is expected to generate 0.84 times more return on investment than MUTUIONLINE. However, ADDUS HOMECARE is 1.19 times less risky than MUTUIONLINE. It trades about 0.11 of its potential returns per unit of risk. MUTUIONLINE is currently generating about 0.04 per unit of risk. If you would invest  7,950  in ADDUS HOMECARE on October 10, 2024 and sell it today you would earn a total of  4,250  from holding ADDUS HOMECARE or generate 53.46% return on investment over 90 days.

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

ADDUS HOMECARE  vs.  MUTUIONLINE

ADDUS HOMECARE

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ADDUS HOMECARE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, ADDUS HOMECARE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

MUTUIONLINE

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MUTUIONLINE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, MUTUIONLINE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ADDUS HOMECARE and MUTUIONLINE

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

The idea behind ADDUS HOMECARE and MUTUIONLINE 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.