Correlation Between Addus HomeCare and IDEXX Laboratories
Can any of the company-specific risk be diversified away by investing in both Addus HomeCare and IDEXX Laboratories 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 IDEXX Laboratories into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Addus HomeCare and IDEXX Laboratories, you can compare the effects of market volatilities on Addus HomeCare and IDEXX Laboratories 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 IDEXX Laboratories. Check out your portfolio center. Please also check ongoing floating volatility patterns of Addus HomeCare and IDEXX Laboratories.
Diversification Opportunities for Addus HomeCare and IDEXX Laboratories
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Addus and IDEXX is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and IDEXX Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDEXX Laboratories 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 IDEXX Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDEXX Laboratories has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and IDEXX Laboratories go up and down completely randomly.
Pair Corralation between Addus HomeCare and IDEXX Laboratories
Given the investment horizon of 90 days Addus HomeCare is expected to generate 1.17 times more return on investment than IDEXX Laboratories. However, Addus HomeCare is 1.17 times more volatile than IDEXX Laboratories. It trades about 0.03 of its potential returns per unit of risk. IDEXX Laboratories is currently generating about 0.01 per unit of risk. If you would invest 10,673 in Addus HomeCare on August 27, 2024 and sell it today you would earn a total of 1,759 from holding Addus HomeCare or generate 16.48% 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. IDEXX Laboratories
Performance |
| Timeline |
| Addus HomeCare |
| IDEXX Laboratories |
Addus HomeCare and IDEXX Laboratories Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Addus HomeCare and IDEXX Laboratories
The main advantage of trading using opposite Addus HomeCare and IDEXX Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Addus HomeCare position performs unexpectedly, IDEXX Laboratories 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 IDEXX Laboratories will offset losses from the drop in IDEXX Laboratories' long position.| Addus HomeCare vs. Encompass Health Corp | Addus HomeCare vs. Pennant Group | Addus HomeCare vs. Acadia Healthcare | Addus HomeCare vs. Select Medical Holdings |
| IDEXX Laboratories vs. Waters | IDEXX Laboratories vs. IQVIA Holdings | IDEXX Laboratories vs. Charles River Laboratories | IDEXX Laboratories vs. Revvity |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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