Correlation Between Addus HomeCare and Option Care

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

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

Diversification Opportunities for Addus HomeCare and Option Care

0.77

Correlation Coefficient

Addus HomeCare  Option Care

Poor diversification

The 3 months correlation between Addus and Option is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and Option Care Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Option Care Health 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 Option Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Option Care Health has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and Option Care go up and down completely randomly.

Pair Corralation between Addus HomeCare and Option Care

Given the investment horizon of 90 days Addus HomeCare is expected to generate 0.47 times more return on investment than Option Care. However, Addus HomeCare is 2.11 times less risky than Option Care. It trades about -0.08 of its potential returns per unit of risk. Option Care Health is currently generating about -0.12 per unit of risk. If you would invest  13,301  in Addus HomeCare on August 30, 2024 and sell it today you would lose (1,172) from holding Addus HomeCare or give up 8.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Addus HomeCare  vs.  Option Care Health

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 latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Option Care Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Option Care Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Addus HomeCare and Option Care

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

The idea behind Addus HomeCare and Option Care Health 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.