Correlation Between Addus HomeCare and American Shared

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

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

Diversification Opportunities for Addus HomeCare and American Shared

0.8

Correlation Coefficient

Addus HomeCare  American Shared

Very poor diversification

The 3 months correlation between Addus and American is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and American Shared Hospital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Shared Hospital and Addus HomeCare 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 Addus HomeCare are associated (or correlated) with American Shared. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Shared Hospital has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and American Shared go up and down completely randomly.

Pair Corralation between Addus HomeCare and American Shared

Given the investment horizon of 90 days Addus HomeCare is expected to under-perform the American Shared. In addition to that, Addus HomeCare is 1.12 times more volatile than American Shared Hospital. It trades about -0.28 of its total potential returns per unit of risk. American Shared Hospital is currently generating about -0.15 per unit of volatility. If you would invest  332.00  in American Shared Hospital on December 20, 2024 and sell it today you would lose (53.40) from holding American Shared Hospital or give up 16.08% of portfolio value over 90 days.

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

Addus HomeCare  vs.  American Shared Hospital

Addus HomeCare

Risk-Adjusted Performance

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 unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

American Shared Hospital

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Shared Hospital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Addus HomeCare and American Shared

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

The idea behind Addus HomeCare and American Shared Hospital 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.