Correlation Between Addus HomeCare and Dairy Farm
Can any of the company-specific risk be diversified away by investing in both Addus HomeCare and Dairy Farm 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 Dairy Farm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Addus HomeCare and Dairy Farm International, you can compare the effects of market volatilities on Addus HomeCare and Dairy Farm 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 Dairy Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Addus HomeCare and Dairy Farm.
Diversification Opportunities for Addus HomeCare and Dairy Farm
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Addus and Dairy is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and Dairy Farm International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dairy Farm International 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 Dairy Farm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dairy Farm International has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and Dairy Farm go up and down completely randomly.
Pair Corralation between Addus HomeCare and Dairy Farm
Assuming the 90 days horizon Addus HomeCare is expected to generate 0.8 times more return on investment than Dairy Farm. However, Addus HomeCare is 1.25 times less risky than Dairy Farm. It trades about 0.12 of its potential returns per unit of risk. Dairy Farm International is currently generating about 0.04 per unit of risk. If you would invest 11,700 in Addus HomeCare on October 17, 2024 and sell it today you would earn a total of 300.00 from holding Addus HomeCare or generate 2.56% 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. Dairy Farm International
Performance |
| Timeline |
| Addus HomeCare |
| Dairy Farm International |
Addus HomeCare and Dairy Farm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Addus HomeCare and Dairy Farm
The main advantage of trading using opposite Addus HomeCare and Dairy Farm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Addus HomeCare position performs unexpectedly, Dairy Farm 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 Dairy Farm will offset losses from the drop in Dairy Farm's long position.| Addus HomeCare vs. SCOTT TECHNOLOGY | Addus HomeCare vs. HK Electric Investments | Addus HomeCare vs. Firan Technology Group | Addus HomeCare vs. Scottish Mortgage Investment |
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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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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