Correlation Between Acadia Healthcare and Regional Health

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

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

Diversification Opportunities for Acadia Healthcare and Regional Health

-0.85

Correlation Coefficient

Acadia Healthcare  Regional Health

Pay attention - limited upside

The 3 months correlation between Acadia and Regional is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Acadia Healthcare and Regional Health Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regional Health Prop 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 Regional Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regional Health Prop has no effect on the direction of Acadia Healthcare i.e., Acadia Healthcare and Regional Health go up and down completely randomly.

Pair Corralation between Acadia Healthcare and Regional Health

Given the investment horizon of 90 days Acadia Healthcare is expected to under-perform the Regional Health. But the stock apears to be less risky and, when comparing its historical volatility, Acadia Healthcare is 7.0 times less risky than Regional Health. The stock trades about -0.08 of its potential returns per unit of risk. The Regional Health Properties is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  153.00  in Regional Health Properties on December 29, 2024 and sell it today you would earn a total of  79.00  from holding Regional Health Properties or generate 51.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	40.98%
Values	Daily Returns

Acadia Healthcare  vs.  Regional Health Properties

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.

Regional Health Prop

Risk-Adjusted Performance

Good

Over the last 90 days Regional Health Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather weak technical indicators, Regional Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Acadia Healthcare and Regional Health

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

The idea behind Acadia Healthcare and Regional Health Properties 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.