Correlation Between Addus HomeCare and CAPITAL

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

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

Diversification Opportunities for Addus HomeCare and CAPITAL

-0.17

Correlation Coefficient

Addus HomeCare  CAPITAL

Good diversification

The 3 months correlation between Addus and CAPITAL is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and CAPITAL ONE FINL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAPITAL ONE FINL 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 CAPITAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAPITAL ONE FINL has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and CAPITAL go up and down completely randomly.

Pair Corralation between Addus HomeCare and CAPITAL

Given the investment horizon of 90 days Addus HomeCare is expected to generate 14.87 times more return on investment than CAPITAL. However, Addus HomeCare is 14.87 times more volatile than CAPITAL ONE FINL. It trades about 0.15 of its potential returns per unit of risk. CAPITAL ONE FINL is currently generating about 0.0 per unit of risk. If you would invest  12,072  in Addus HomeCare on October 10, 2024 and sell it today you would earn a total of  570.00  from holding Addus HomeCare or generate 4.72% 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.  CAPITAL ONE FINL

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.

CAPITAL ONE FINL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CAPITAL ONE FINL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CAPITAL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Addus HomeCare and CAPITAL

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

The idea behind Addus HomeCare and CAPITAL ONE FINL 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.

Check out your portfolio center.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.