Correlation Between Air New and Addus HomeCare

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

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

Diversification Opportunities for Air New and Addus HomeCare

0.17

Correlation Coefficient

Air New  Addus HomeCare

Average diversification

The 3 months correlation between Air and Addus is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and Addus HomeCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addus HomeCare and Air New 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 Air New Zealand 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 Air New i.e., Air New and Addus HomeCare go up and down completely randomly.

Pair Corralation between Air New and Addus HomeCare

Assuming the 90 days trading horizon Air New is expected to generate 1.46 times less return on investment than Addus HomeCare. In addition to that, Air New is 2.29 times more volatile than Addus HomeCare. It trades about 0.07 of its total potential returns per unit of risk. Addus HomeCare is currently generating about 0.22 per unit of volatility. If you would invest  11,200  in Addus HomeCare on October 10, 2024 and sell it today you would earn a total of  700.00  from holding Addus HomeCare or generate 6.25% return on investment over 90 days.

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

Air New Zealand  vs.  Addus HomeCare

Air New Zealand

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Air New Zealand are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Air New may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Addus HomeCare

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Addus HomeCare are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Addus HomeCare is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Air New and Addus HomeCare

The main advantage of trading using opposite Air New and Addus HomeCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air New 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 Air New Zealand 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.