Correlation Between Addus HomeCare and Quaker Chemical

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

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

Diversification Opportunities for Addus HomeCare and Quaker Chemical

0.08

Correlation Coefficient

Addus HomeCare  Quaker Chemical

Significant diversification

The 3 months correlation between Addus and Quaker is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and Quaker Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quaker Chemical 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 Quaker Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quaker Chemical has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and Quaker Chemical go up and down completely randomly.

Pair Corralation between Addus HomeCare and Quaker Chemical

Assuming the 90 days horizon Addus HomeCare is expected to generate 1.14 times more return on investment than Quaker Chemical. However, Addus HomeCare is 1.14 times more volatile than Quaker Chemical. It trades about 0.08 of its potential returns per unit of risk. Quaker Chemical is currently generating about -0.01 per unit of risk. If you would invest  7,700  in Addus HomeCare on September 14, 2024 and sell it today you would earn a total of  3,600  from holding Addus HomeCare or generate 46.75% return on investment over 90 days.

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

Addus HomeCare  vs.  Quaker Chemical

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.

Quaker Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Addus HomeCare and Quaker Chemical 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.