Correlation Between Addus HomeCare and Hitachi Construction
Can any of the company-specific risk be diversified away by investing in both Addus HomeCare and Hitachi Construction 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 Hitachi Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Addus HomeCare and Hitachi Construction Machinery, you can compare the effects of market volatilities on Addus HomeCare and Hitachi Construction 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 Hitachi Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Addus HomeCare and Hitachi Construction.
Diversification Opportunities for Addus HomeCare and Hitachi Construction
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Addus and Hitachi is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction 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 Hitachi Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitachi Construction has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and Hitachi Construction go up and down completely randomly.
Pair Corralation between Addus HomeCare and Hitachi Construction
Assuming the 90 days horizon Addus HomeCare is expected to generate 1.19 times more return on investment than Hitachi Construction. However, Addus HomeCare is 1.19 times more volatile than Hitachi Construction Machinery. It trades about 0.03 of its potential returns per unit of risk. Hitachi Construction Machinery is currently generating about 0.01 per unit of risk. If you would invest 9,500 in Addus HomeCare on September 12, 2024 and sell it today you would earn a total of 1,700 from holding Addus HomeCare or generate 17.89% 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. Hitachi Construction Machinery
Performance |
| Timeline |
| Addus HomeCare |
| Hitachi Construction |
Addus HomeCare and Hitachi Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Addus HomeCare and Hitachi Construction
The main advantage of trading using opposite Addus HomeCare and Hitachi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Addus HomeCare position performs unexpectedly, Hitachi Construction 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 Hitachi Construction will offset losses from the drop in Hitachi Construction's long position.| Addus HomeCare vs. Ramsay Health Care | Addus HomeCare vs. Universal Health Services | Addus HomeCare vs. Superior Plus Corp | Addus HomeCare vs. SIVERS SEMICONDUCTORS AB |
| Hitachi Construction vs. Superior Plus Corp | Hitachi Construction vs. SIVERS SEMICONDUCTORS AB | Hitachi Construction vs. NorAm Drilling AS | Hitachi Construction vs. Norsk Hydro ASA |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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