Correlation Between Addus HomeCare and Shimano

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

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

Diversification Opportunities for Addus HomeCare and Shimano

-0.11

Correlation Coefficient

Addus HomeCare  Shimano

Good diversification

The 3 months correlation between Addus and Shimano is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and Shimano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shimano 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 Shimano. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shimano has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and Shimano go up and down completely randomly.

Pair Corralation between Addus HomeCare and Shimano

Assuming the 90 days horizon Addus HomeCare is expected to generate 1.26 times more return on investment than Shimano. However, Addus HomeCare is 1.26 times more volatile than Shimano. It trades about 0.05 of its potential returns per unit of risk. Shimano is currently generating about -0.13 per unit of risk. If you would invest  11,900  in Addus HomeCare on October 20, 2024 and sell it today you would earn a total of  600.00  from holding Addus HomeCare or generate 5.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Addus HomeCare  vs.  Shimano

Addus HomeCare

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Addus HomeCare are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Addus HomeCare may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Shimano

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shimano 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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Addus HomeCare and Shimano

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

The idea behind Addus HomeCare and Shimano 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.