Correlation Between Aveanna Healthcare and Empower Clinics

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

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

Diversification Opportunities for Aveanna Healthcare and Empower Clinics

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Correlation Coefficient

Aveanna Healthcare  Empower Clinics

Pay attention - limited upside

The 3 months correlation between Aveanna and Empower is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Aveanna Healthcare Holdings and Empower Clinics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empower Clinics and Aveanna Healthcare 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 Aveanna Healthcare Holdings are associated (or correlated) with Empower Clinics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empower Clinics has no effect on the direction of Aveanna Healthcare i.e., Aveanna Healthcare and Empower Clinics go up and down completely randomly.

Pair Corralation between Aveanna Healthcare and Empower Clinics

Given the investment horizon of 90 days Aveanna Healthcare is expected to generate 115.82 times less return on investment than Empower Clinics. But when comparing it to its historical volatility, Aveanna Healthcare Holdings is 38.44 times less risky than Empower Clinics. It trades about 0.08 of its potential returns per unit of risk. Empower Clinics is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  2.50  in Empower Clinics on October 12, 2024 and sell it today you would lose (2.49) from holding Empower Clinics or give up 99.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	59.6%
Values	Daily Returns

Aveanna Healthcare Holdings  vs.  Empower Clinics

Aveanna Healthcare

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Aveanna Healthcare Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Empower Clinics

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Empower Clinics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Empower Clinics is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Aveanna Healthcare and Empower Clinics

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

The idea behind Aveanna Healthcare Holdings and Empower Clinics 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.