Correlation Between Addus HomeCare and Simon Property

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

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

Diversification Opportunities for Addus HomeCare and Simon Property

-0.27

Correlation Coefficient

Addus HomeCare  Simon Property

Very good diversification

The 3 months correlation between Addus and Simon is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and Simon Property Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simon Property Group 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 Simon Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simon Property Group has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and Simon Property go up and down completely randomly.

Pair Corralation between Addus HomeCare and Simon Property

Given the investment horizon of 90 days Addus HomeCare is expected to generate 1.7 times more return on investment than Simon Property. However, Addus HomeCare is 1.7 times more volatile than Simon Property Group. It trades about 0.03 of its potential returns per unit of risk. Simon Property Group is currently generating about 0.03 per unit of risk. If you would invest  10,495  in Addus HomeCare on October 26, 2024 and sell it today you would earn a total of  2,567  from holding Addus HomeCare or generate 24.46% return on investment over 90 days.

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

Addus HomeCare  vs.  Simon Property Group

Addus HomeCare

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Addus HomeCare are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Simon Property Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Simon Property Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady technical and fundamental indicators, Simon Property is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Addus HomeCare and Simon Property

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

The idea behind Addus HomeCare and Simon Property Group 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.