Correlation Between Acadia Healthcare and Oncology Institute

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

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

Diversification Opportunities for Acadia Healthcare and Oncology Institute

0.71

Correlation Coefficient

Acadia Healthcare  Oncology Institute

Poor diversification

The 3 months correlation between Acadia and Oncology is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Acadia Healthcare and Oncology Institute in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oncology Institute 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 Oncology Institute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oncology Institute has no effect on the direction of Acadia Healthcare i.e., Acadia Healthcare and Oncology Institute go up and down completely randomly.

Pair Corralation between Acadia Healthcare and Oncology Institute

Given the investment horizon of 90 days Acadia Healthcare is expected to under-perform the Oncology Institute. But the stock apears to be less risky and, when comparing its historical volatility, Acadia Healthcare is 2.68 times less risky than Oncology Institute. The stock trades about -0.12 of its potential returns per unit of risk. The Oncology Institute is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  32.00  in Oncology Institute on October 5, 2024 and sell it today you would lose (2.70) from holding Oncology Institute or give up 8.44% of portfolio value over 90 days.

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

Acadia Healthcare  vs.  Oncology Institute

Acadia Healthcare

Risk-Adjusted Performance

0 of 100

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 February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Oncology Institute

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Oncology Institute are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Oncology Institute demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Acadia Healthcare and Oncology Institute

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

The idea behind Acadia Healthcare and Oncology Institute 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.