Correlation Between WT OFFSHORE and Acadia Healthcare

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

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

Diversification Opportunities for WT OFFSHORE and Acadia Healthcare

0.54

Correlation Coefficient

WT OFFSHORE  Acadia Healthcare

Very weak diversification

The 3 months correlation between UWV and Acadia is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding WT OFFSHORE and Acadia Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acadia Healthcare and WT OFFSHORE 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 WT OFFSHORE 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 WT OFFSHORE i.e., WT OFFSHORE and Acadia Healthcare go up and down completely randomly.

Pair Corralation between WT OFFSHORE and Acadia Healthcare

Assuming the 90 days trading horizon WT OFFSHORE is expected to under-perform the Acadia Healthcare. In addition to that, WT OFFSHORE is 1.35 times more volatile than Acadia Healthcare. It trades about -0.06 of its total potential returns per unit of risk. Acadia Healthcare is currently generating about -0.03 per unit of volatility. If you would invest  7,700  in Acadia Healthcare on October 11, 2024 and sell it today you would lose (3,260) from holding Acadia Healthcare or give up 42.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

WT OFFSHORE  vs.  Acadia Healthcare

WT OFFSHORE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WT OFFSHORE 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 basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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. Despite latest uncertain 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 WT OFFSHORE and Acadia Healthcare

The main advantage of trading using opposite WT OFFSHORE and Acadia Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WT OFFSHORE 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 WT OFFSHORE 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..