Correlation Between Addus HomeCare and Bank of America
Can any of the company-specific risk be diversified away by investing in both Addus HomeCare and Bank of America 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 Bank of America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Addus HomeCare and Verizon Communications, you can compare the effects of market volatilities on Addus HomeCare and Bank of America 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 Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Addus HomeCare and Bank of America.
Diversification Opportunities for Addus HomeCare and Bank of America
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Addus and Bank is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and Bank of America go up and down completely randomly.
Pair Corralation between Addus HomeCare and Bank of America
Assuming the 90 days horizon Addus HomeCare is expected to generate 1.75 times more return on investment than Bank of America. However, Addus HomeCare is 1.75 times more volatile than Verizon Communications. It trades about 0.06 of its potential returns per unit of risk. Verizon Communications is currently generating about 0.02 per unit of risk. If you would invest 10,600 in Addus HomeCare on September 29, 2024 and sell it today you would earn a total of 1,800 from holding Addus HomeCare or generate 16.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Addus HomeCare vs. Verizon Communications
Performance |
| Timeline |
| Addus HomeCare |
| Verizon Communications |
Addus HomeCare and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Addus HomeCare and Bank of America
The main advantage of trading using opposite Addus HomeCare and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Addus HomeCare position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.| Addus HomeCare vs. Ramsay Health Care | Addus HomeCare vs. Medicover AB | Addus HomeCare vs. Charoen Pokphand Foods |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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