Correlation Between Capital Clean and Addus HomeCare

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

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

Diversification Opportunities for Capital Clean and Addus HomeCare

0.17

Correlation Coefficient

Capital Clean  Addus HomeCare

Average diversification

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

Pair Corralation between Capital Clean and Addus HomeCare

Given the investment horizon of 90 days Capital Clean Energy is expected to under-perform the Addus HomeCare. But the stock apears to be less risky and, when comparing its historical volatility, Capital Clean Energy is 1.03 times less risky than Addus HomeCare. The stock trades about -0.04 of its potential returns per unit of risk. The Addus HomeCare is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  12,295  in Addus HomeCare on September 24, 2024 and sell it today you would earn a total of  798.00  from holding Addus HomeCare or generate 6.49% return on investment over 90 days.

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

Capital Clean Energy  vs.  Addus HomeCare

Capital Clean Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Capital Clean is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Addus HomeCare

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Capital Clean and Addus HomeCare

The main advantage of trading using opposite Capital Clean and Addus HomeCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Clean 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 Capital Clean Energy 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.