Correlation Between Addus HomeCare and Medical Facilities

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

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

Diversification Opportunities for Addus HomeCare and Medical Facilities

-0.67

Correlation Coefficient

Addus HomeCare  Medical Facilities

Excellent diversification

The 3 months correlation between Addus and Medical is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and Medical Facilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Facilities 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 Medical Facilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Facilities has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and Medical Facilities go up and down completely randomly.

Pair Corralation between Addus HomeCare and Medical Facilities

Given the investment horizon of 90 days Addus HomeCare is expected to generate 0.94 times more return on investment than Medical Facilities. However, Addus HomeCare is 1.06 times less risky than Medical Facilities. It trades about 0.24 of its potential returns per unit of risk. Medical Facilities is currently generating about -0.08 per unit of risk. If you would invest  12,099  in Addus HomeCare on September 21, 2024 and sell it today you would earn a total of  1,088  from holding Addus HomeCare or generate 8.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Addus HomeCare  vs.  Medical Facilities

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.

Medical Facilities

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Facilities are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Medical Facilities may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Addus HomeCare and Medical Facilities

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

The idea behind Addus HomeCare and Medical Facilities 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.

Check out your portfolio center.

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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.