Correlation Between Addus HomeCare and Nike
Can any of the company-specific risk be diversified away by investing in both Addus HomeCare and Nike 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 Nike into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Addus HomeCare and Nike Inc, you can compare the effects of market volatilities on Addus HomeCare and Nike 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 Nike. Check out your portfolio center. Please also check ongoing floating volatility patterns of Addus HomeCare and Nike.
Diversification Opportunities for Addus HomeCare and Nike
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Addus and Nike is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc 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 Nike. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nike Inc has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and Nike go up and down completely randomly.
Pair Corralation between Addus HomeCare and Nike
Given the investment horizon of 90 days Addus HomeCare is expected to generate 1.09 times more return on investment than Nike. However, Addus HomeCare is 1.09 times more volatile than Nike Inc. It trades about 0.03 of its potential returns per unit of risk. Nike Inc is currently generating about -0.02 per unit of risk. If you would invest 10,533 in Addus HomeCare on September 2, 2024 and sell it today you would earn a total of 1,751 from holding Addus HomeCare or generate 16.62% 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. Nike Inc
Performance |
| Timeline |
| Addus HomeCare |
| Nike Inc |
Addus HomeCare and Nike Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Addus HomeCare and Nike
The main advantage of trading using opposite Addus HomeCare and Nike positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Addus HomeCare position performs unexpectedly, Nike 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 Nike will offset losses from the drop in Nike'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 |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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