Correlation Between Analog Devices and Addus HomeCare

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

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

Diversification Opportunities for Analog Devices and Addus HomeCare

0.76

Correlation Coefficient

Analog Devices  Addus HomeCare

Poor diversification

The 3 months correlation between Analog and Addus is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and Addus HomeCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addus HomeCare and Analog Devices 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 Analog Devices are associated (or correlated) with Addus HomeCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Addus HomeCare has no effect on the direction of Analog Devices i.e., Analog Devices and Addus HomeCare go up and down completely randomly.

Pair Corralation between Analog Devices and Addus HomeCare

Considering the 90-day investment horizon Analog Devices is expected to under-perform the Addus HomeCare. In addition to that, Analog Devices is 1.02 times more volatile than Addus HomeCare. It trades about -0.02 of its total potential returns per unit of risk. Addus HomeCare is currently generating about 0.0 per unit of volatility. If you would invest  13,252  in Addus HomeCare on September 18, 2024 and sell it today you would lose (179.00) from holding Addus HomeCare or give up 1.35% of portfolio value over 90 days.

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

Analog Devices  vs.  Addus HomeCare

Analog Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Addus HomeCare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Addus HomeCare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Addus HomeCare is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Analog Devices and Addus HomeCare

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

The idea behind Analog Devices and Addus HomeCare 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.