Correlation Between ALERION CLEANPOWER and Addus HomeCare

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

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

Diversification Opportunities for ALERION CLEANPOWER and Addus HomeCare

0.43

Correlation Coefficient

ALERION CLEANPOWER  Addus HomeCare

Very weak diversification

The 3 months correlation between ALERION and Addus is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding ALERION CLEANPOWER and Addus HomeCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addus HomeCare and ALERION CLEANPOWER 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 ALERION CLEANPOWER 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 ALERION CLEANPOWER i.e., ALERION CLEANPOWER and Addus HomeCare go up and down completely randomly.

Pair Corralation between ALERION CLEANPOWER and Addus HomeCare

Assuming the 90 days trading horizon ALERION CLEANPOWER is expected to under-perform the Addus HomeCare. But the stock apears to be less risky and, when comparing its historical volatility, ALERION CLEANPOWER is 1.17 times less risky than Addus HomeCare. The stock trades about -0.3 of its potential returns per unit of risk. The Addus HomeCare is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  11,400  in Addus HomeCare on December 1, 2024 and sell it today you would lose (2,250) from holding Addus HomeCare or give up 19.74% of portfolio value over 90 days.

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

ALERION CLEANPOWER  vs.  Addus HomeCare

ALERION CLEANPOWER

Risk-Adjusted Performance

Very Weak

Over the last 90 days ALERION CLEANPOWER has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Addus HomeCare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Addus HomeCare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with ALERION CLEANPOWER and Addus HomeCare

The main advantage of trading using opposite ALERION CLEANPOWER and Addus HomeCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALERION CLEANPOWER 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 ALERION CLEANPOWER 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.