Correlation Between Addus HomeCare and Transocean

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

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

Diversification Opportunities for Addus HomeCare and Transocean

0.24

Correlation Coefficient

Addus HomeCare  Transocean

Modest diversification

The 3 months correlation between Addus and Transocean is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and Transocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transocean 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 Transocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transocean has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and Transocean go up and down completely randomly.

Pair Corralation between Addus HomeCare and Transocean

Given the investment horizon of 90 days Addus HomeCare is expected to generate 0.65 times more return on investment than Transocean. However, Addus HomeCare is 1.55 times less risky than Transocean. It trades about 0.08 of its potential returns per unit of risk. Transocean is currently generating about -0.27 per unit of risk. If you would invest  12,207  in Addus HomeCare on September 15, 2024 and sell it today you would earn a total of  293.00  from holding Addus HomeCare or generate 2.4% return on investment over 90 days.

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

Addus HomeCare  vs.  Transocean

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.

Transocean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transocean has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's forward 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 Transocean

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

The idea behind Addus HomeCare and Transocean 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.