Correlation Between Addus HomeCare and BW Offshore

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

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

Diversification Opportunities for Addus HomeCare and BW Offshore

-0.26

Correlation Coefficient

Addus HomeCare  BW Offshore

Very good diversification

The 3 months correlation between Addus and BWOFY is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and BW Offshore Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore Limited 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 BW Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW Offshore Limited has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and BW Offshore go up and down completely randomly.

Pair Corralation between Addus HomeCare and BW Offshore

Given the investment horizon of 90 days Addus HomeCare is expected to under-perform the BW Offshore. But the stock apears to be less risky and, when comparing its historical volatility, Addus HomeCare is 1.17 times less risky than BW Offshore. The stock trades about -0.01 of its potential returns per unit of risk. The BW Offshore Limited is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  560.00  in BW Offshore Limited on September 21, 2024 and sell it today you would lose (5.00) from holding BW Offshore Limited or give up 0.89% of portfolio value over 90 days.

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

Addus HomeCare  vs.  BW Offshore Limited

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.

BW Offshore Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BW Offshore Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, BW Offshore is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Addus HomeCare and BW Offshore

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

The idea behind Addus HomeCare and BW Offshore Limited 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.