Correlation Between EBRO FOODS and Addus HomeCare

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

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

Diversification Opportunities for EBRO FOODS and Addus HomeCare

0.01

Correlation Coefficient

EBRO FOODS  Addus HomeCare

Significant diversification

The 3 months correlation between EBRO and Addus is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding EBRO FOODS and Addus HomeCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addus HomeCare and EBRO FOODS 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 EBRO FOODS are associated (or correlated) with Addus HomeCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Addus HomeCare has no effect on the direction of EBRO FOODS i.e., EBRO FOODS and Addus HomeCare go up and down completely randomly.

Pair Corralation between EBRO FOODS and Addus HomeCare

Assuming the 90 days trading horizon EBRO FOODS is expected to generate 2.3 times less return on investment than Addus HomeCare. But when comparing it to its historical volatility, EBRO FOODS is 1.58 times less risky than Addus HomeCare. It trades about 0.02 of its potential returns per unit of risk. Addus HomeCare is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  9,350  in Addus HomeCare on September 28, 2024 and sell it today you would earn a total of  3,050  from holding Addus HomeCare or generate 32.62% return on investment over 90 days.

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

EBRO FOODS  vs.  Addus HomeCare

EBRO FOODS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Addus HomeCare

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Addus HomeCare are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Addus HomeCare may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with EBRO FOODS and Addus HomeCare

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

The idea behind EBRO FOODS and Addus HomeCare 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.