Correlation Between Acadia Healthcare and Preferred Bank
Can any of the company-specific risk be diversified away by investing in both Acadia Healthcare and Preferred Bank 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 Acadia Healthcare and Preferred Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Acadia Healthcare and Preferred Bank, you can compare the effects of market volatilities on Acadia Healthcare and Preferred Bank 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 Acadia Healthcare with a short position of Preferred Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Acadia Healthcare and Preferred Bank.
Diversification Opportunities for Acadia Healthcare and Preferred Bank
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Acadia and Preferred is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Acadia Healthcare and Preferred Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Preferred Bank and Acadia Healthcare 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 Acadia Healthcare are associated (or correlated) with Preferred Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Preferred Bank has no effect on the direction of Acadia Healthcare i.e., Acadia Healthcare and Preferred Bank go up and down completely randomly.
Pair Corralation between Acadia Healthcare and Preferred Bank
Assuming the 90 days horizon Acadia Healthcare is expected to generate 2.17 times more return on investment than Preferred Bank. However, Acadia Healthcare is 2.17 times more volatile than Preferred Bank. It trades about 0.29 of its potential returns per unit of risk. Preferred Bank is currently generating about -0.03 per unit of risk. If you would invest 3,620 in Acadia Healthcare on October 29, 2024 and sell it today you would earn a total of 620.00 from holding Acadia Healthcare or generate 17.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Acadia Healthcare vs. Preferred Bank
Performance |
| Timeline |
| Acadia Healthcare |
| Preferred Bank |
Acadia Healthcare and Preferred Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Acadia Healthcare and Preferred Bank
The main advantage of trading using opposite Acadia Healthcare and Preferred Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Acadia Healthcare position performs unexpectedly, Preferred Bank 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 Preferred Bank will offset losses from the drop in Preferred Bank's long position.| Acadia Healthcare vs. Spirent Communications plc | Acadia Healthcare vs. Cars Inc | Acadia Healthcare vs. CarsalesCom | Acadia Healthcare vs. Singapore Telecommunications Limited |
| Preferred Bank vs. POSBO UNSPADRS20YC1 | Preferred Bank vs. Postal Savings Bank | Preferred Bank vs. Truist Financial | Preferred Bank vs. OVERSEA CHINUNSPADR2 |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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