Correlation Between Cross Country and Addus HomeCare

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

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

Diversification Opportunities for Cross Country and Addus HomeCare

0.08

Correlation Coefficient

Cross Country  Addus HomeCare

Significant diversification

The 3 months correlation between Cross and Addus is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Cross Country Healthcare and Addus HomeCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addus HomeCare and Cross Country 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 Cross Country Healthcare 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 Cross Country i.e., Cross Country and Addus HomeCare go up and down completely randomly.

Pair Corralation between Cross Country and Addus HomeCare

Given the investment horizon of 90 days Cross Country is expected to generate 4.05 times less return on investment than Addus HomeCare. But when comparing it to its historical volatility, Cross Country Healthcare is 5.99 times less risky than Addus HomeCare. It trades about 0.17 of its potential returns per unit of risk. Addus HomeCare is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  12,072  in Addus HomeCare on October 8, 2024 and sell it today you would earn a total of  387.00  from holding Addus HomeCare or generate 3.21% return on investment over 90 days.

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

Cross Country Healthcare  vs.  Addus HomeCare

Cross Country Healthcare

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cross Country Healthcare are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Cross Country displayed solid returns over the last few months and may actually be approaching a breakup point.

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Cross Country and Addus HomeCare

The main advantage of trading using opposite Cross Country and Addus HomeCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cross Country 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 Cross Country Healthcare 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.