Correlation Between Addus HomeCare and ModivCare

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

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

Diversification Opportunities for Addus HomeCare and ModivCare

-0.63

Correlation Coefficient

Addus HomeCare  ModivCare

Excellent diversification

The 3 months correlation between Addus and ModivCare is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and ModivCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ModivCare 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 ModivCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ModivCare has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and ModivCare go up and down completely randomly.

Pair Corralation between Addus HomeCare and ModivCare

Given the investment horizon of 90 days Addus HomeCare is expected to generate 0.28 times more return on investment than ModivCare. However, Addus HomeCare is 3.52 times less risky than ModivCare. It trades about 0.24 of its potential returns per unit of risk. ModivCare is currently generating about -0.23 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	100.0%
Values	Daily Returns

Addus HomeCare  vs.  ModivCare

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.

ModivCare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ModivCare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, ModivCare is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Addus HomeCare and ModivCare

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

The idea behind Addus HomeCare and ModivCare 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.