Correlation Between Addus HomeCare and CareMax
Can any of the company-specific risk be diversified away by investing in both Addus HomeCare and CareMax 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 CareMax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Addus HomeCare and CareMax, you can compare the effects of market volatilities on Addus HomeCare and CareMax 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 CareMax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Addus HomeCare and CareMax.
Diversification Opportunities for Addus HomeCare and CareMax
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Addus and CareMax is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and CareMax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareMax 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 CareMax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareMax has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and CareMax go up and down completely randomly.
Pair Corralation between Addus HomeCare and CareMax
Given the investment horizon of 90 days Addus HomeCare is expected to generate 0.1 times more return on investment than CareMax. However, Addus HomeCare is 10.47 times less risky than CareMax. It trades about 0.09 of its potential returns per unit of risk. CareMax is currently generating about -0.02 per unit of risk. If you would invest 8,319 in Addus HomeCare on August 25, 2024 and sell it today you would earn a total of 4,113 from holding Addus HomeCare or generate 49.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Addus HomeCare vs. CareMax
Performance |
| Timeline |
| Addus HomeCare |
| CareMax |
Addus HomeCare and CareMax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Addus HomeCare and CareMax
The main advantage of trading using opposite Addus HomeCare and CareMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Addus HomeCare position performs unexpectedly, CareMax 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 CareMax will offset losses from the drop in CareMax's long position.The idea behind Addus HomeCare and CareMax pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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