Correlation Between Addus HomeCare and HCA Holdings

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

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

Diversification Opportunities for Addus HomeCare and HCA Holdings

-0.24

Correlation Coefficient

Addus HomeCare  HCA Holdings

Very good diversification

The 3 months correlation between Addus and HCA is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and HCA Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCA Holdings 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 HCA Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCA Holdings has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and HCA Holdings go up and down completely randomly.

Pair Corralation between Addus HomeCare and HCA Holdings

Given the investment horizon of 90 days Addus HomeCare is expected to under-perform the HCA Holdings. In addition to that, Addus HomeCare is 1.09 times more volatile than HCA Holdings. It trades about -0.19 of its total potential returns per unit of risk. HCA Holdings is currently generating about -0.05 per unit of volatility. If you would invest  32,694  in HCA Holdings on December 1, 2024 and sell it today you would lose (2,064) from holding HCA Holdings or give up 6.31% 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.  HCA Holdings

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.

HCA Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days HCA Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, HCA Holdings 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 HCA Holdings

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

The idea behind Addus HomeCare and HCA Holdings 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.