Correlation Between International Consolidated and Addus HomeCare

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

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

Diversification Opportunities for International Consolidated and Addus HomeCare

0.3

Correlation Coefficient

International Consolidated  Addus HomeCare

Weak diversification

The 3 months correlation between International and Addus is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Air and Addus HomeCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addus HomeCare and International Consolidated 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 International Consolidated Airlines 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 International Consolidated i.e., International Consolidated and Addus HomeCare go up and down completely randomly.

Pair Corralation between International Consolidated and Addus HomeCare

Assuming the 90 days horizon International Consolidated Airlines is expected to generate 1.03 times more return on investment than Addus HomeCare. However, International Consolidated is 1.03 times more volatile than Addus HomeCare. It trades about 0.26 of its potential returns per unit of risk. Addus HomeCare is currently generating about 0.22 per unit of risk. If you would invest  338.00  in International Consolidated Airlines on October 10, 2024 and sell it today you would earn a total of  25.00  from holding International Consolidated Airlines or generate 7.4% return on investment over 90 days.

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

International Consolidated Air  vs.  Addus HomeCare

International Consolidated

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in International Consolidated Airlines are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, International Consolidated reported solid returns over the last few months and may actually be approaching a breakup point.

Addus HomeCare

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Addus HomeCare are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Addus HomeCare is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with International Consolidated and Addus HomeCare

The main advantage of trading using opposite International Consolidated and Addus HomeCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Consolidated 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 International Consolidated Airlines 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.