Correlation Between Acadia Healthcare and InnovAge Holding

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

By analyzing existing cross correlation between Acadia Healthcare and InnovAge Holding Corp, you can compare the effects of market volatilities on Acadia Healthcare and InnovAge Holding 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 InnovAge Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Acadia Healthcare and InnovAge Holding.

Diversification Opportunities for Acadia Healthcare and InnovAge Holding

0.48

Correlation Coefficient

Acadia Healthcare  InnovAge Holding

Very weak diversification

The 3 months correlation between Acadia and InnovAge is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Acadia Healthcare and InnovAge Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InnovAge Holding Corp 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 InnovAge Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InnovAge Holding Corp has no effect on the direction of Acadia Healthcare i.e., Acadia Healthcare and InnovAge Holding go up and down completely randomly.

Pair Corralation between Acadia Healthcare and InnovAge Holding

Given the investment horizon of 90 days Acadia Healthcare is expected to generate 1.37 times more return on investment than InnovAge Holding. However, Acadia Healthcare is 1.37 times more volatile than InnovAge Holding Corp. It trades about -0.08 of its potential returns per unit of risk. InnovAge Holding Corp is currently generating about -0.14 per unit of risk. If you would invest  3,858  in Acadia Healthcare on December 29, 2024 and sell it today you would lose (846.00) from holding Acadia Healthcare or give up 21.93% of portfolio value over 90 days.

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

Acadia Healthcare  vs.  InnovAge Holding Corp

Acadia Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Acadia Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

InnovAge Holding Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days InnovAge Holding Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Acadia Healthcare and InnovAge Holding

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

The idea behind Acadia Healthcare and InnovAge Holding Corp 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.