Correlation Between Addus HomeCare and Beijing MediaLimited

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

By analyzing existing cross correlation between Addus HomeCare and Beijing Media, you can compare the effects of market volatilities on Addus HomeCare and Beijing MediaLimited 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 Beijing MediaLimited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Addus HomeCare and Beijing MediaLimited.

Diversification Opportunities for Addus HomeCare and Beijing MediaLimited

-0.45

Correlation Coefficient

Addus HomeCare  Beijing MediaLimited

Very good diversification

The 3 months correlation between Addus and Beijing is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and Beijing Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing MediaLimited 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 Beijing MediaLimited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing MediaLimited has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and Beijing MediaLimited go up and down completely randomly.

Pair Corralation between Addus HomeCare and Beijing MediaLimited

Assuming the 90 days horizon Addus HomeCare is expected to under-perform the Beijing MediaLimited. But the stock apears to be less risky and, when comparing its historical volatility, Addus HomeCare is 1.62 times less risky than Beijing MediaLimited. The stock trades about -0.02 of its potential returns per unit of risk. The Beijing Media is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3.35  in Beijing Media on September 2, 2024 and sell it today you would lose (0.15) from holding Beijing Media or give up 4.48% of portfolio value over 90 days.

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

Addus HomeCare  vs.  Beijing Media

Addus HomeCare

Risk-Adjusted Performance

0 of 100

Very Weak

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

Beijing MediaLimited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beijing Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Beijing MediaLimited 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 Beijing MediaLimited

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

The idea behind Addus HomeCare and Beijing Media 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.