Correlation Between Addus HomeCare and Applied Materials
Can any of the company-specific risk be diversified away by investing in both Addus HomeCare and Applied Materials 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 Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Addus HomeCare and Applied Materials, you can compare the effects of market volatilities on Addus HomeCare and Applied Materials 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 Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Addus HomeCare and Applied Materials.
Diversification Opportunities for Addus HomeCare and Applied Materials
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Addus and Applied is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials 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 Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and Applied Materials go up and down completely randomly.
Pair Corralation between Addus HomeCare and Applied Materials
Assuming the 90 days horizon Addus HomeCare is expected to generate 5.02 times less return on investment than Applied Materials. But when comparing it to its historical volatility, Addus HomeCare is 1.08 times less risky than Applied Materials. It trades about 0.07 of its potential returns per unit of risk. Applied Materials is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 16,130 in Applied Materials on October 24, 2024 and sell it today you would earn a total of 2,344 from holding Applied Materials or generate 14.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Addus HomeCare vs. Applied Materials
Performance |
| Timeline |
| Addus HomeCare |
| Applied Materials |
Addus HomeCare and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Addus HomeCare and Applied Materials
The main advantage of trading using opposite Addus HomeCare and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Addus HomeCare position performs unexpectedly, Applied Materials 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 Applied Materials will offset losses from the drop in Applied Materials' long position.| Addus HomeCare vs. Cal Maine Foods | Addus HomeCare vs. United Natural Foods | Addus HomeCare vs. INDOFOOD AGRI RES | Addus HomeCare vs. Performance Food Group |
| Applied Materials vs. SPORT LISBOA E | Applied Materials vs. SCIENCE IN SPORT | Applied Materials vs. TOREX SEMICONDUCTOR LTD | Applied Materials vs. COLUMBIA SPORTSWEAR |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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