Correlation Between Fresenius and Acadia Healthcare

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

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

Diversification Opportunities for Fresenius and Acadia Healthcare

0.71

Correlation Coefficient

Fresenius  Acadia Healthcare

Poor diversification

The 3 months correlation between Fresenius and Acadia is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Fresenius SE Co and Acadia Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acadia Healthcare and Fresenius 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 Fresenius SE Co 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 Fresenius i.e., Fresenius and Acadia Healthcare go up and down completely randomly.

Pair Corralation between Fresenius and Acadia Healthcare

Assuming the 90 days horizon Fresenius SE Co is expected to under-perform the Acadia Healthcare. But the pink sheet apears to be less risky and, when comparing its historical volatility, Fresenius SE Co is 2.1 times less risky than Acadia Healthcare. The pink sheet trades about -0.22 of its potential returns per unit of risk. The Acadia Healthcare is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  4,150  in Acadia Healthcare on October 6, 2024 and sell it today you would earn a total of  282.00  from holding Acadia Healthcare or generate 6.8% return on investment over 90 days.

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

Fresenius SE Co  vs.  Acadia Healthcare

Fresenius SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fresenius SE Co 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.

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. In spite of unsteady performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Fresenius and Acadia Healthcare

The main advantage of trading using opposite Fresenius and Acadia Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fresenius 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 Fresenius SE Co 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .