Correlation Between ADDUS HOMECARE and Reinsurance Group

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

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

Diversification Opportunities for ADDUS HOMECARE and Reinsurance Group

0.87

Correlation Coefficient

ADDUS HOMECARE  Reinsurance Group

Very poor diversification

The 3 months correlation between ADDUS and Reinsurance is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding ADDUS HOMECARE and Reinsurance Group of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reinsurance Group 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 Reinsurance Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reinsurance Group has no effect on the direction of ADDUS HOMECARE i.e., ADDUS HOMECARE and Reinsurance Group go up and down completely randomly.

Pair Corralation between ADDUS HOMECARE and Reinsurance Group

Assuming the 90 days trading horizon ADDUS HOMECARE is expected to under-perform the Reinsurance Group. In addition to that, ADDUS HOMECARE is 1.56 times more volatile than Reinsurance Group of. It trades about -0.19 of its total potential returns per unit of risk. Reinsurance Group of is currently generating about -0.08 per unit of volatility. If you would invest  19,714  in Reinsurance Group of on December 23, 2024 and sell it today you would lose (2,114) from holding Reinsurance Group of or give up 10.72% of portfolio value over 90 days.

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

ADDUS HOMECARE  vs.  Reinsurance Group of

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 fragile 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.

Reinsurance Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reinsurance Group of 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.

Pair Trading with ADDUS HOMECARE and Reinsurance Group

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

The idea behind ADDUS HOMECARE and Reinsurance Group of 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.