Correlation Between Addus HomeCare and CVS Health
Can any of the company-specific risk be diversified away by investing in both Addus HomeCare and CVS Health 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 CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Addus HomeCare and CVS Health, you can compare the effects of market volatilities on Addus HomeCare and CVS Health 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 CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Addus HomeCare and CVS Health.
Diversification Opportunities for Addus HomeCare and CVS Health
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Addus and CVS is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health 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 CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and CVS Health go up and down completely randomly.
Pair Corralation between Addus HomeCare and CVS Health
Assuming the 90 days horizon Addus HomeCare is expected to generate 1.18 times more return on investment than CVS Health. However, Addus HomeCare is 1.18 times more volatile than CVS Health. It trades about 0.02 of its potential returns per unit of risk. CVS Health is currently generating about -0.03 per unit of risk. If you would invest 9,800 in Addus HomeCare on September 4, 2024 and sell it today you would earn a total of 1,500 from holding Addus HomeCare or generate 15.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Addus HomeCare vs. CVS Health
Performance |
| Timeline |
| Addus HomeCare |
| CVS Health |
Addus HomeCare and CVS Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Addus HomeCare and CVS Health
The main advantage of trading using opposite Addus HomeCare and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Addus HomeCare position performs unexpectedly, CVS Health 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 CVS Health will offset losses from the drop in CVS Health's long position.| Addus HomeCare vs. Superior Plus Corp | Addus HomeCare vs. NMI Holdings | Addus HomeCare vs. Origin Agritech | Addus HomeCare vs. SIVERS SEMICONDUCTORS AB |
| CVS Health vs. TOTAL GABON | CVS Health vs. Walgreens Boots Alliance | CVS Health vs. Peak Resources Limited |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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