Correlation Between WATER WAYS and Addus HomeCare

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

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

Diversification Opportunities for WATER WAYS and Addus HomeCare

-0.35

Correlation Coefficient

WATER WAYS  Addus HomeCare

Very good diversification

The 3 months correlation between WATER and Addus is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding WATER WAYS TECHS and Addus HomeCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addus HomeCare and WATER WAYS 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 WATER WAYS TECHS 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 WATER WAYS i.e., WATER WAYS and Addus HomeCare go up and down completely randomly.

Pair Corralation between WATER WAYS and Addus HomeCare

Assuming the 90 days horizon WATER WAYS TECHS is expected to generate 12.12 times more return on investment than Addus HomeCare. However, WATER WAYS is 12.12 times more volatile than Addus HomeCare. It trades about 0.06 of its potential returns per unit of risk. Addus HomeCare is currently generating about 0.03 per unit of risk. If you would invest  187.00  in WATER WAYS TECHS on October 4, 2024 and sell it today you would lose (186.85) from holding WATER WAYS TECHS or give up 99.92% of portfolio value over 90 days.

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

WATER WAYS TECHS  vs.  Addus HomeCare

WATER WAYS TECHS

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WATER WAYS TECHS are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, WATER WAYS reported solid returns over the last few months and may actually be approaching a breakup point.

Addus HomeCare

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Addus HomeCare are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Addus HomeCare may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with WATER WAYS and Addus HomeCare

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