Correlation Between Addus HomeCare and Cal Maine

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

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

Diversification Opportunities for Addus HomeCare and Cal Maine

0.91

Correlation Coefficient

Addus HomeCare  Cal Maine

Almost no diversification

The 3 months correlation between Addus and Cal is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and Cal Maine Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cal Maine Foods 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 Cal Maine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cal Maine Foods has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and Cal Maine go up and down completely randomly.

Pair Corralation between Addus HomeCare and Cal Maine

Assuming the 90 days horizon Addus HomeCare is expected to under-perform the Cal Maine. But the stock apears to be less risky and, when comparing its historical volatility, Addus HomeCare is 1.37 times less risky than Cal Maine. The stock trades about -0.21 of its potential returns per unit of risk. The Cal Maine Foods is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  9,461  in Cal Maine Foods on December 28, 2024 and sell it today you would lose (733.00) from holding Cal Maine Foods or give up 7.75% of portfolio value over 90 days.

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

Addus HomeCare  vs.  Cal Maine Foods

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 uncertain 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.

Cal Maine Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cal Maine Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cal Maine is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Addus HomeCare and Cal Maine

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

The idea behind Addus HomeCare and Cal Maine Foods 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.