Correlation Between Acadia Healthcare and DaVita HealthCare

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

By analyzing existing cross correlation between Acadia Healthcare and DaVita HealthCare Partners, you can compare the effects of market volatilities on Acadia Healthcare and DaVita HealthCare 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 Acadia Healthcare with a short position of DaVita HealthCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Acadia Healthcare and DaVita HealthCare.

Diversification Opportunities for Acadia Healthcare and DaVita HealthCare

0.54

Correlation Coefficient

Acadia Healthcare  DaVita HealthCare

Very weak diversification

The 3 months correlation between Acadia and DaVita is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Acadia Healthcare and DaVita HealthCare Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DaVita HealthCare and Acadia Healthcare 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 Acadia Healthcare are associated (or correlated) with DaVita HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DaVita HealthCare has no effect on the direction of Acadia Healthcare i.e., Acadia Healthcare and DaVita HealthCare go up and down completely randomly.

Pair Corralation between Acadia Healthcare and DaVita HealthCare

Given the investment horizon of 90 days Acadia Healthcare is expected to generate 1.09 times more return on investment than DaVita HealthCare. However, Acadia Healthcare is 1.09 times more volatile than DaVita HealthCare Partners. It trades about 0.05 of its potential returns per unit of risk. DaVita HealthCare Partners is currently generating about -0.01 per unit of risk. If you would invest  3,910  in Acadia Healthcare on November 20, 2024 and sell it today you would earn a total of  196.00  from holding Acadia Healthcare or generate 5.01% return on investment over 90 days.

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

Acadia Healthcare  vs.  DaVita HealthCare Partners

Acadia Healthcare

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Acadia Healthcare are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, Acadia Healthcare may actually be approaching a critical reversion point that can send shares even higher in March 2025.

DaVita HealthCare

Risk-Adjusted Performance

Very Weak

Over the last 90 days DaVita HealthCare Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, DaVita HealthCare is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Acadia Healthcare and DaVita HealthCare

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

The idea behind Acadia Healthcare and DaVita HealthCare Partners 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.