Correlation Between ADDUS HOMECARE and LIBERTY DEFENSE
Can any of the company-specific risk be diversified away by investing in both ADDUS HOMECARE and LIBERTY DEFENSE 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 ADDUS HOMECARE and LIBERTY DEFENSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ADDUS HOMECARE and LIBERTY DEFENSE H, you can compare the effects of market volatilities on ADDUS HOMECARE and LIBERTY DEFENSE 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 ADDUS HOMECARE with a short position of LIBERTY DEFENSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of ADDUS HOMECARE and LIBERTY DEFENSE.
Diversification Opportunities for ADDUS HOMECARE and LIBERTY DEFENSE
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ADDUS and LIBERTY is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding ADDUS HOMECARE and LIBERTY DEFENSE H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIBERTY DEFENSE H and ADDUS HOMECARE 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 ADDUS HOMECARE are associated (or correlated) with LIBERTY DEFENSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIBERTY DEFENSE H has no effect on the direction of ADDUS HOMECARE i.e., ADDUS HOMECARE and LIBERTY DEFENSE go up and down completely randomly.
Pair Corralation between ADDUS HOMECARE and LIBERTY DEFENSE
Assuming the 90 days trading horizon ADDUS HOMECARE is expected to generate 13.93 times less return on investment than LIBERTY DEFENSE. But when comparing it to its historical volatility, ADDUS HOMECARE is 3.98 times less risky than LIBERTY DEFENSE. It trades about 0.13 of its potential returns per unit of risk. LIBERTY DEFENSE H is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest 52.00 in LIBERTY DEFENSE H on October 30, 2024 and sell it today you would earn a total of 38.00 from holding LIBERTY DEFENSE H or generate 73.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ADDUS HOMECARE vs. LIBERTY DEFENSE H
Performance |
| Timeline |
| ADDUS HOMECARE |
| LIBERTY DEFENSE H |
ADDUS HOMECARE and LIBERTY DEFENSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ADDUS HOMECARE and LIBERTY DEFENSE
The main advantage of trading using opposite ADDUS HOMECARE and LIBERTY DEFENSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ADDUS HOMECARE position performs unexpectedly, LIBERTY DEFENSE 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 LIBERTY DEFENSE will offset losses from the drop in LIBERTY DEFENSE's long position.| ADDUS HOMECARE vs. Apple Inc | ADDUS HOMECARE vs. Apple Inc | ADDUS HOMECARE vs. Apple Inc | ADDUS HOMECARE vs. Apple Inc |
| LIBERTY DEFENSE vs. TOMBADOR IRON LTD | LIBERTY DEFENSE vs. Nippon Steel | LIBERTY DEFENSE vs. CHAMPION IRON | LIBERTY DEFENSE vs. Ross Stores |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope |