Correlation Between Addus HomeCare and INVITATION HOMES

Can any of the company-specific risk be diversified away by investing in both Addus HomeCare and INVITATION 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 INVITATION 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 INVITATION HOMES DL, you can compare the effects of market volatilities on Addus HomeCare and INVITATION 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 INVITATION HOMES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Addus HomeCare and INVITATION HOMES.

Diversification Opportunities for Addus HomeCare and INVITATION HOMES

-0.68

Correlation Coefficient

Addus HomeCare  INVITATION HOMES

Excellent diversification

The 3 months correlation between Addus and INVITATION is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and INVITATION HOMES DL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INVITATION HOMES 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 INVITATION HOMES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INVITATION HOMES has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and INVITATION HOMES go up and down completely randomly.

Pair Corralation between Addus HomeCare and INVITATION HOMES

Assuming the 90 days horizon Addus HomeCare is expected to under-perform the INVITATION HOMES. In addition to that, Addus HomeCare is 1.75 times more volatile than INVITATION HOMES DL. It trades about -0.18 of its total potential returns per unit of risk. INVITATION HOMES DL is currently generating about 0.05 per unit of volatility. If you would invest  3,034  in INVITATION HOMES DL on December 30, 2024 and sell it today you would earn a total of  126.00  from holding INVITATION HOMES DL or generate 4.15% return on investment over 90 days.

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

Addus HomeCare  vs.  INVITATION HOMES DL

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

INVITATION HOMES

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in INVITATION HOMES DL are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, INVITATION HOMES is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Addus HomeCare and INVITATION HOMES

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

The idea behind Addus HomeCare and INVITATION HOMES DL 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.