Correlation Between Addus HomeCare and Pentair PLC
Can any of the company-specific risk be diversified away by investing in both Addus HomeCare and Pentair PLC 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 Pentair PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Addus HomeCare and Pentair PLC, you can compare the effects of market volatilities on Addus HomeCare and Pentair PLC 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 Pentair PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Addus HomeCare and Pentair PLC.
Diversification Opportunities for Addus HomeCare and Pentair PLC
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Addus and Pentair is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC 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 Pentair PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentair PLC has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and Pentair PLC go up and down completely randomly.
Pair Corralation between Addus HomeCare and Pentair PLC
Given the investment horizon of 90 days Addus HomeCare is expected to under-perform the Pentair PLC. In addition to that, Addus HomeCare is 2.0 times more volatile than Pentair PLC. It trades about -0.05 of its total potential returns per unit of risk. Pentair PLC is currently generating about 0.47 per unit of volatility. If you would invest 9,847 in Pentair PLC on September 2, 2024 and sell it today you would earn a total of 1,052 from holding Pentair PLC or generate 10.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Addus HomeCare vs. Pentair PLC
Performance |
| Timeline |
| Addus HomeCare |
| Pentair PLC |
Addus HomeCare and Pentair PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Addus HomeCare and Pentair PLC
The main advantage of trading using opposite Addus HomeCare and Pentair PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Addus HomeCare position performs unexpectedly, Pentair PLC 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 Pentair PLC will offset losses from the drop in Pentair PLC'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 |
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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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