Correlation Between Evolution Petroleum and Acadia Healthcare

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

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

Diversification Opportunities for Evolution Petroleum and Acadia Healthcare

-0.4

Correlation Coefficient

Evolution Petroleum  Acadia Healthcare

Very good diversification

The 3 months correlation between Evolution and Acadia is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Evolution Petroleum and Acadia Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acadia Healthcare and Evolution Petroleum 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 Evolution Petroleum are associated (or correlated) with Acadia Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acadia Healthcare has no effect on the direction of Evolution Petroleum i.e., Evolution Petroleum and Acadia Healthcare go up and down completely randomly.

Pair Corralation between Evolution Petroleum and Acadia Healthcare

Assuming the 90 days horizon Evolution Petroleum is expected to generate 0.67 times more return on investment than Acadia Healthcare. However, Evolution Petroleum is 1.5 times less risky than Acadia Healthcare. It trades about 0.12 of its potential returns per unit of risk. Acadia Healthcare is currently generating about -0.04 per unit of risk. If you would invest  465.00  in Evolution Petroleum on October 26, 2024 and sell it today you would earn a total of  70.00  from holding Evolution Petroleum or generate 15.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Evolution Petroleum  vs.  Acadia Healthcare

Evolution Petroleum

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution Petroleum are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Evolution Petroleum reported solid returns over the last few months and may actually be approaching a breakup point.

Acadia Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acadia Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Evolution Petroleum and Acadia Healthcare

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

The idea behind Evolution Petroleum and Acadia Healthcare 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.