Correlation Between Addus HomeCare and Western Union

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

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

Diversification Opportunities for Addus HomeCare and Western Union

-0.38

Correlation Coefficient

Addus HomeCare  Western Union

Very good diversification

The 3 months correlation between Addus and Western is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and Western Union Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Union 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 Western Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Union has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and Western Union go up and down completely randomly.

Pair Corralation between Addus HomeCare and Western Union

Given the investment horizon of 90 days Addus HomeCare is expected to generate 2.43 times less return on investment than Western Union. In addition to that, Addus HomeCare is 1.43 times more volatile than Western Union Co. It trades about 0.01 of its total potential returns per unit of risk. Western Union Co is currently generating about 0.03 per unit of volatility. If you would invest  919.00  in Western Union Co on December 4, 2024 and sell it today you would earn a total of  146.00  from holding Western Union Co or generate 15.89% 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.  Western Union Co

Addus HomeCare

Risk-Adjusted Performance

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 unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Western Union

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Union Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Western Union is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Addus HomeCare and Western Union

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

The idea behind Addus HomeCare and Western Union Co 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 Transaction History module to view history of all your transactions and understand their impact on performance.