Correlation Between Addus HomeCare and ALERION CLEANPOWER

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

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

Diversification Opportunities for Addus HomeCare and ALERION CLEANPOWER

0.7

Correlation Coefficient

Addus HomeCare  ALERION CLEANPOWER

Poor diversification

The 3 months correlation between Addus and ALERION is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and ALERION CLEANPOWER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALERION CLEANPOWER 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 ALERION CLEANPOWER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALERION CLEANPOWER has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and ALERION CLEANPOWER go up and down completely randomly.

Pair Corralation between Addus HomeCare and ALERION CLEANPOWER

Assuming the 90 days horizon Addus HomeCare is expected to under-perform the ALERION CLEANPOWER. But the stock apears to be less risky and, when comparing its historical volatility, Addus HomeCare is 1.39 times less risky than ALERION CLEANPOWER. The stock trades about -0.2 of its potential returns per unit of risk. The ALERION CLEANPOWER is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,592  in ALERION CLEANPOWER on December 29, 2024 and sell it today you would lose (174.00) from holding ALERION CLEANPOWER or give up 10.93% of portfolio value over 90 days.

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

Addus HomeCare  vs.  ALERION CLEANPOWER

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.

ALERION CLEANPOWER

Risk-Adjusted Performance

Very Weak

Over the last 90 days ALERION CLEANPOWER has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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 ALERION CLEANPOWER

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

The idea behind Addus HomeCare and ALERION CLEANPOWER 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.