Correlation Between Addus HomeCare and Sienna Senior

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

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

Diversification Opportunities for Addus HomeCare and Sienna Senior

0.02

Correlation Coefficient

Addus HomeCare  Sienna Senior

Significant diversification

The 3 months correlation between Addus and Sienna is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and Sienna Senior Living in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sienna Senior Living 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 Sienna Senior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sienna Senior Living has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and Sienna Senior go up and down completely randomly.

Pair Corralation between Addus HomeCare and Sienna Senior

Given the investment horizon of 90 days Addus HomeCare is expected to generate 1.2 times less return on investment than Sienna Senior. But when comparing it to its historical volatility, Addus HomeCare is 1.03 times less risky than Sienna Senior. It trades about 0.09 of its potential returns per unit of risk. Sienna Senior Living is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  733.00  in Sienna Senior Living on October 1, 2024 and sell it today you would earn a total of  371.00  from holding Sienna Senior Living or generate 50.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	81.66%
Values	Daily Returns

Addus HomeCare  vs.  Sienna Senior Living

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.

Sienna Senior Living

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sienna Senior Living has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Addus HomeCare and Sienna Senior

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

The idea behind Addus HomeCare and Sienna Senior Living 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.