Correlation Between Addus HomeCare and BCB Bancorp

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

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

Diversification Opportunities for Addus HomeCare and BCB Bancorp

-0.39

Correlation Coefficient

Addus HomeCare  BCB Bancorp

Very good diversification

The 3 months correlation between Addus and BCB is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and BCB Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCB Bancorp 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 BCB Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCB Bancorp has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and BCB Bancorp go up and down completely randomly.

Pair Corralation between Addus HomeCare and BCB Bancorp

Given the investment horizon of 90 days Addus HomeCare is expected to generate 1.89 times less return on investment than BCB Bancorp. But when comparing it to its historical volatility, Addus HomeCare is 1.48 times less risky than BCB Bancorp. It trades about 0.04 of its potential returns per unit of risk. BCB Bancorp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  978.00  in BCB Bancorp on October 13, 2024 and sell it today you would earn a total of  118.00  from holding BCB Bancorp or generate 12.07% return on investment over 90 days.

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

Addus HomeCare  vs.  BCB Bancorp

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

BCB Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BCB Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Addus HomeCare and BCB Bancorp

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

The idea behind Addus HomeCare and BCB Bancorp 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.