Correlation Between Addus HomeCare and Cebu Air
Can any of the company-specific risk be diversified away by investing in both Addus HomeCare and Cebu Air 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 Cebu Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Addus HomeCare and Cebu Air ADR, you can compare the effects of market volatilities on Addus HomeCare and Cebu Air 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 Cebu Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Addus HomeCare and Cebu Air.
Diversification Opportunities for Addus HomeCare and Cebu Air
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Addus and Cebu is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and Cebu Air ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cebu Air ADR 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 Cebu Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cebu Air ADR has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and Cebu Air go up and down completely randomly.
Pair Corralation between Addus HomeCare and Cebu Air
Given the investment horizon of 90 days Addus HomeCare is expected to generate 0.68 times more return on investment than Cebu Air. However, Addus HomeCare is 1.47 times less risky than Cebu Air. It trades about -0.1 of its potential returns per unit of risk. Cebu Air ADR is currently generating about -0.22 per unit of risk. If you would invest 12,896 in Addus HomeCare on September 3, 2024 and sell it today you would lose (587.00) from holding Addus HomeCare or give up 4.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Addus HomeCare vs. Cebu Air ADR
Performance |
| Timeline |
| Addus HomeCare |
| Cebu Air ADR |
Addus HomeCare and Cebu Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Addus HomeCare and Cebu Air
The main advantage of trading using opposite Addus HomeCare and Cebu Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Addus HomeCare position performs unexpectedly, Cebu Air 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 Cebu Air will offset losses from the drop in Cebu Air's long position.| Addus HomeCare vs. Select Medical Holdings | Addus HomeCare vs. Encompass Health Corp | Addus HomeCare vs. Pennant Group | Addus HomeCare vs. Acadia Healthcare |
| Cebu Air vs. Finnair Oyj | Cebu Air vs. easyJet plc | Cebu Air vs. Norse Atlantic ASA | Cebu Air vs. Air New Zealand |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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