Correlation Between Addus HomeCare and Loews Corp

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

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

Diversification Opportunities for Addus HomeCare and Loews Corp

-0.5

Correlation Coefficient

Addus HomeCare  Loews Corp

Very good diversification

The 3 months correlation between Addus and Loews is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and Loews Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loews Corp 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 Loews Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loews Corp has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and Loews Corp go up and down completely randomly.

Pair Corralation between Addus HomeCare and Loews Corp

Given the investment horizon of 90 days Addus HomeCare is expected to generate 1.35 times more return on investment than Loews Corp. However, Addus HomeCare is 1.35 times more volatile than Loews Corp. It trades about 0.1 of its potential returns per unit of risk. Loews Corp is currently generating about -0.02 per unit of risk. If you would invest  12,296  in Addus HomeCare on October 11, 2024 and sell it today you would earn a total of  346.00  from holding Addus HomeCare or generate 2.81% return on investment over 90 days.

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

Addus HomeCare  vs.  Loews Corp

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.

Loews Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Loews Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Loews Corp is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Addus HomeCare and Loews Corp

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

The idea behind Addus HomeCare and Loews Corp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.