Correlation Between Sienna Senior and Addus HomeCare

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

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

Diversification Opportunities for Sienna Senior and Addus HomeCare

0.24

Correlation Coefficient

Sienna Senior  Addus HomeCare

Modest diversification

The 3 months correlation between Sienna and Addus is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Sienna Senior Living and Addus HomeCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addus HomeCare and Sienna Senior 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 Sienna Senior Living 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 Sienna Senior i.e., Sienna Senior and Addus HomeCare go up and down completely randomly.

Pair Corralation between Sienna Senior and Addus HomeCare

Assuming the 90 days horizon Sienna Senior Living is expected to under-perform the Addus HomeCare. But the pink sheet apears to be less risky and, when comparing its historical volatility, Sienna Senior Living is 1.39 times less risky than Addus HomeCare. The pink sheet trades about -0.31 of its potential returns per unit of risk. The Addus HomeCare is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  12,099  in Addus HomeCare on September 21, 2024 and sell it today you would earn a total of  1,088  from holding Addus HomeCare or generate 8.99% return on investment over 90 days.

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

Sienna Senior Living  vs.  Addus HomeCare

Sienna Senior Living

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

Pair Trading with Sienna Senior and Addus HomeCare

The main advantage of trading using opposite Sienna Senior and Addus HomeCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sienna Senior 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 Sienna Senior Living 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.