Correlation Between Apple and Acadia Healthcare

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

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

Diversification Opportunities for Apple and Acadia Healthcare

-0.55

Correlation Coefficient

Apple  Acadia Healthcare

Excellent diversification

The 3 months correlation between Apple and Acadia is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Acadia Healthcare Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acadia Healthcare and Apple 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 Apple Inc 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 Apple i.e., Apple and Acadia Healthcare go up and down completely randomly.

Pair Corralation between Apple and Acadia Healthcare

Assuming the 90 days trading horizon Apple is expected to generate 21.89 times less return on investment than Acadia Healthcare. But when comparing it to its historical volatility, Apple Inc is 3.84 times less risky than Acadia Healthcare. It trades about 0.03 of its potential returns per unit of risk. Acadia Healthcare Co is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  3,860  in Acadia Healthcare Co on October 10, 2024 and sell it today you would earn a total of  400.00  from holding Acadia Healthcare Co or generate 10.36% return on investment over 90 days.

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

Apple Inc  vs.  Acadia Healthcare Co

Apple Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

Acadia Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acadia Healthcare Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Apple and Acadia Healthcare

The main advantage of trading using opposite Apple and Acadia Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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 Apple Inc and Acadia Healthcare 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.