Correlation Between Corporate Office and ADDUS HOMECARE

Can any of the company-specific risk be diversified away by investing in both Corporate Office 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 Corporate Office and ADDUS HOMECARE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Corporate Office Properties and ADDUS HOMECARE, you can compare the effects of market volatilities on Corporate Office 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 Corporate Office with a short position of ADDUS HOMECARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Corporate Office and ADDUS HOMECARE.

Diversification Opportunities for Corporate Office and ADDUS HOMECARE

0.17

Correlation Coefficient

Corporate Office  ADDUS HOMECARE

Average diversification

The 3 months correlation between Corporate and ADDUS is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Corporate Office Properties and ADDUS HOMECARE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADDUS HOMECARE and Corporate Office 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 Corporate Office Properties 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 Corporate Office i.e., Corporate Office and ADDUS HOMECARE go up and down completely randomly.

Pair Corralation between Corporate Office and ADDUS HOMECARE

Assuming the 90 days horizon Corporate Office is expected to generate 1.12 times less return on investment than ADDUS HOMECARE. But when comparing it to its historical volatility, Corporate Office Properties is 1.33 times less risky than ADDUS HOMECARE. It trades about 0.04 of its potential returns per unit of risk. ADDUS HOMECARE is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  9,850  in ADDUS HOMECARE on October 10, 2024 and sell it today you would earn a total of  2,350  from holding ADDUS HOMECARE or generate 23.86% return on investment over 90 days.

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

Corporate Office Properties  vs.  ADDUS HOMECARE

Corporate Office Pro

Risk-Adjusted Performance

4 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Corporate Office Properties are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Corporate Office is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

ADDUS HOMECARE

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ADDUS HOMECARE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, ADDUS HOMECARE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Corporate Office and ADDUS HOMECARE

The main advantage of trading using opposite Corporate Office and ADDUS HOMECARE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corporate Office 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 Corporate Office Properties 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.