Correlation Between Akamai Technologies and Acadia Healthcare

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

By analyzing existing cross correlation between Akamai Technologies and Acadia Healthcare, you can compare the effects of market volatilities on Akamai Technologies and Acadia Healthcare 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 Akamai Technologies with a short position of Acadia Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Akamai Technologies and Acadia Healthcare.

Diversification Opportunities for Akamai Technologies and Acadia Healthcare

0.59

Correlation Coefficient

Akamai Technologies  Acadia Healthcare

Very weak diversification

The 3 months correlation between Akamai and Acadia is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Akamai Technologies and Acadia Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acadia Healthcare and Akamai Technologies 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 Akamai Technologies are associated (or correlated) with Acadia Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acadia Healthcare has no effect on the direction of Akamai Technologies i.e., Akamai Technologies and Acadia Healthcare go up and down completely randomly.

Pair Corralation between Akamai Technologies and Acadia Healthcare

Assuming the 90 days trading horizon Akamai Technologies is expected to under-perform the Acadia Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Akamai Technologies is 2.16 times less risky than Acadia Healthcare. The stock trades about -0.2 of its potential returns per unit of risk. The Acadia Healthcare is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  3,740  in Acadia Healthcare on October 11, 2024 and sell it today you would earn a total of  700.00  from holding Acadia Healthcare or generate 18.72% return on investment over 90 days.

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

Akamai Technologies  vs.  Acadia Healthcare

Akamai Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Akamai Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Akamai Technologies is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Acadia Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acadia Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic 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 Akamai Technologies and Acadia Healthcare

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

The idea behind Akamai Technologies and Acadia Healthcare 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.