Correlation Between Addus HomeCare and LOEWS

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Can any of the company-specific risk be diversified away by investing in both Addus HomeCare and LOEWS 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 LOEWS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Addus HomeCare and LOEWS P 375, you can compare the effects of market volatilities on Addus HomeCare and LOEWS 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 LOEWS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Addus HomeCare and LOEWS.

Diversification Opportunities for Addus HomeCare and LOEWS

0.54
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Addus and LOEWS is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and LOEWS P 375 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOEWS P 375 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 LOEWS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOEWS P 375 has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and LOEWS go up and down completely randomly.

Pair Corralation between Addus HomeCare and LOEWS

Given the investment horizon of 90 days Addus HomeCare is expected to generate 5.9 times more return on investment than LOEWS. However, Addus HomeCare is 5.9 times more volatile than LOEWS P 375. It trades about 0.03 of its potential returns per unit of risk. LOEWS P 375 is currently generating about -0.01 per unit of risk. If you would invest  10,533  in Addus HomeCare on September 1, 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 Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy91.92%
ValuesDaily Returns

Addus HomeCare  vs.  LOEWS P 375

 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.
LOEWS P 375 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days LOEWS P 375 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LOEWS is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Addus HomeCare and LOEWS Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Addus HomeCare and LOEWS

The main advantage of trading using opposite Addus HomeCare and LOEWS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Addus HomeCare position performs unexpectedly, LOEWS 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 LOEWS will offset losses from the drop in LOEWS's long position.
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The idea behind Addus HomeCare and LOEWS P 375 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 Anywhere module to track or share privately all of your investments from the convenience of any device.

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