Correlation Between SPORT LISBOA and Addus HomeCare

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

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

Diversification Opportunities for SPORT LISBOA and Addus HomeCare

-0.15

Correlation Coefficient

SPORT LISBOA  Addus HomeCare

Good diversification

The 3 months correlation between SPORT and Addus is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding SPORT LISBOA E and Addus HomeCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addus HomeCare and SPORT LISBOA 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 SPORT LISBOA E 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 SPORT LISBOA i.e., SPORT LISBOA and Addus HomeCare go up and down completely randomly.

Pair Corralation between SPORT LISBOA and Addus HomeCare

Assuming the 90 days horizon SPORT LISBOA E is expected to generate 2.12 times more return on investment than Addus HomeCare. However, SPORT LISBOA is 2.12 times more volatile than Addus HomeCare. It trades about 0.0 of its potential returns per unit of risk. Addus HomeCare is currently generating about -0.42 per unit of risk. If you would invest  309.00  in SPORT LISBOA E on November 28, 2024 and sell it today you would lose (5.00) from holding SPORT LISBOA E or give up 1.62% of portfolio value over 90 days.

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

SPORT LISBOA E  vs.  Addus HomeCare

SPORT LISBOA E

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPORT LISBOA E 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.

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 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 SPORT LISBOA and Addus HomeCare

The main advantage of trading using opposite SPORT LISBOA and Addus HomeCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPORT LISBOA 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 SPORT LISBOA E 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.