Correlation Between Addus HomeCare and Hafnia

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

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

Diversification Opportunities for Addus HomeCare and Hafnia

0.84

Correlation Coefficient

Addus HomeCare  Hafnia

Very poor diversification

The 3 months correlation between Addus and Hafnia is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and Hafnia Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hafnia 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 Hafnia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hafnia Limited has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and Hafnia go up and down completely randomly.

Pair Corralation between Addus HomeCare and Hafnia

Given the investment horizon of 90 days Addus HomeCare is expected to under-perform the Hafnia. But the stock apears to be less risky and, when comparing its historical volatility, Addus HomeCare is 1.57 times less risky than Hafnia. The stock trades about -0.28 of its potential returns per unit of risk. The Hafnia Limited is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  546.00  in Hafnia Limited on December 25, 2024 and sell it today you would lose (105.00) from holding Hafnia Limited or give up 19.23% 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.  Hafnia Limited

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.

Hafnia Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hafnia Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Addus HomeCare and Hafnia

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

The idea behind Addus HomeCare and Hafnia 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.