Correlation Between Addus HomeCare and LOréal SA
Can any of the company-specific risk be diversified away by investing in both Addus HomeCare and LOréal SA 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 LOréal SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Addus HomeCare and LOral SA, you can compare the effects of market volatilities on Addus HomeCare and LOréal SA 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 LOréal SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Addus HomeCare and LOréal SA.
Diversification Opportunities for Addus HomeCare and LOréal SA
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Addus and LOréal is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and LOral SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOréal SA 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 LOréal SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOréal SA has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and LOréal SA go up and down completely randomly.
Pair Corralation between Addus HomeCare and LOréal SA
Assuming the 90 days horizon Addus HomeCare is expected to generate 1.67 times more return on investment than LOréal SA. However, Addus HomeCare is 1.67 times more volatile than LOral SA. It trades about 0.03 of its potential returns per unit of risk. LOral SA is currently generating about 0.0 per unit of risk. If you would invest 9,650 in Addus HomeCare on September 2, 2024 and sell it today you would earn a total of 1,650 from holding Addus HomeCare or generate 17.1% 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. LOral SA
Performance |
| Timeline |
| Addus HomeCare |
| LOréal SA |
Addus HomeCare and LOréal SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Addus HomeCare and LOréal SA
The main advantage of trading using opposite Addus HomeCare and LOréal SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Addus HomeCare position performs unexpectedly, LOréal SA 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 LOréal SA will offset losses from the drop in LOréal SA's long position.| Addus HomeCare vs. Richter Gedeon Vegyszeti | Addus HomeCare vs. Charoen Pokphand Foods | Addus HomeCare vs. Superior Plus Corp | Addus HomeCare vs. Origin Agritech |
| LOréal SA vs. Colgate Palmolive | LOréal SA vs. Superior Plus Corp | LOréal SA vs. NMI Holdings | LOréal SA vs. Origin Agritech |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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