Correlation Between Addus HomeCare and EQUINOR

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Can any of the company-specific risk be diversified away by investing in both Addus HomeCare and EQUINOR 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 EQUINOR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Addus HomeCare and EQUINOR ASA, you can compare the effects of market volatilities on Addus HomeCare and EQUINOR 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 EQUINOR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Addus HomeCare and EQUINOR.

Diversification Opportunities for Addus HomeCare and EQUINOR

0.58
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Addus and EQUINOR is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and EQUINOR ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EQUINOR ASA 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 EQUINOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EQUINOR ASA has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and EQUINOR go up and down completely randomly.

Pair Corralation between Addus HomeCare and EQUINOR

Given the investment horizon of 90 days Addus HomeCare is expected to under-perform the EQUINOR. In addition to that, Addus HomeCare is 4.0 times more volatile than EQUINOR ASA. It trades about -0.05 of its total potential returns per unit of risk. EQUINOR ASA is currently generating about -0.08 per unit of volatility. If you would invest  9,236  in EQUINOR ASA on September 2, 2024 and sell it today you would lose (75.00) from holding EQUINOR ASA or give up 0.81% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.24%
ValuesDaily Returns

Addus HomeCare  vs.  EQUINOR ASA

 Performance 
       Timeline  
Addus HomeCare 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Addus HomeCare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Addus HomeCare is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
EQUINOR ASA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days EQUINOR ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, EQUINOR is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Addus HomeCare and EQUINOR Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Addus HomeCare and EQUINOR

The main advantage of trading using opposite Addus HomeCare and EQUINOR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Addus HomeCare position performs unexpectedly, EQUINOR 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 EQUINOR will offset losses from the drop in EQUINOR's long position.
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The idea behind Addus HomeCare and EQUINOR ASA 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.
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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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