Correlation Between Addus HomeCare and Discover Financial
Can any of the company-specific risk be diversified away by investing in both Addus HomeCare and Discover Financial 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 Discover Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Addus HomeCare and Discover Financial Services, you can compare the effects of market volatilities on Addus HomeCare and Discover Financial 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 Discover Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Addus HomeCare and Discover Financial.
Diversification Opportunities for Addus HomeCare and Discover Financial
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Addus and Discover is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial 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 Discover Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Discover Financial has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and Discover Financial go up and down completely randomly.
Pair Corralation between Addus HomeCare and Discover Financial
Given the investment horizon of 90 days Addus HomeCare is expected to under-perform the Discover Financial. But the stock apears to be less risky and, when comparing its historical volatility, Addus HomeCare is 2.28 times less risky than Discover Financial. The stock trades about -0.08 of its potential returns per unit of risk. The Discover Financial Services is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 15,226 in Discover Financial Services on August 28, 2024 and sell it today you would earn a total of 3,041 from holding Discover Financial Services or generate 19.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Addus HomeCare vs. Discover Financial Services
Performance |
| Timeline |
| Addus HomeCare |
| Discover Financial |
Addus HomeCare and Discover Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Addus HomeCare and Discover Financial
The main advantage of trading using opposite Addus HomeCare and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Addus HomeCare position performs unexpectedly, Discover Financial 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 Discover Financial will offset losses from the drop in Discover Financial's long position.| Addus HomeCare vs. Encompass Health Corp | Addus HomeCare vs. Pennant Group | Addus HomeCare vs. Acadia Healthcare | Addus HomeCare vs. Select Medical Holdings |
| Discover Financial vs. SLM Corp | Discover Financial vs. Orix Corp Ads | Discover Financial vs. FirstCash | Discover Financial vs. Medallion Financial Corp |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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