Correlation Between Addus HomeCare and 00108WAF7

Can any of the company-specific risk be diversified away by investing in both Addus HomeCare and 00108WAF7 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 00108WAF7 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Addus HomeCare and AEP TEX INC, you can compare the effects of market volatilities on Addus HomeCare and 00108WAF7 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 00108WAF7. Check out your portfolio center. Please also check ongoing floating volatility patterns of Addus HomeCare and 00108WAF7.

Diversification Opportunities for Addus HomeCare and 00108WAF7

-0.08

Correlation Coefficient

Addus HomeCare  00108WAF7

Good diversification

The 3 months correlation between Addus and 00108WAF7 is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and AEP TEX INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEP TEX INC 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 00108WAF7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEP TEX INC has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and 00108WAF7 go up and down completely randomly.

Pair Corralation between Addus HomeCare and 00108WAF7

Given the investment horizon of 90 days Addus HomeCare is expected to generate 0.32 times more return on investment than 00108WAF7. However, Addus HomeCare is 3.09 times less risky than 00108WAF7. It trades about 0.14 of its potential returns per unit of risk. AEP TEX INC is currently generating about 0.04 per unit of risk. If you would invest  12,072  in Addus HomeCare on October 9, 2024 and sell it today you would earn a total of  498.00  from holding Addus HomeCare or generate 4.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	63.16%
Values	Daily Returns

Addus HomeCare  vs.  AEP TEX INC

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

AEP TEX INC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AEP TEX INC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, 00108WAF7 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Addus HomeCare and 00108WAF7

The main advantage of trading using opposite Addus HomeCare and 00108WAF7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Addus HomeCare position performs unexpectedly, 00108WAF7 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 00108WAF7 will offset losses from the drop in 00108WAF7's long position.

The idea behind Addus HomeCare and AEP TEX INC 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.