Correlation Between Addus HomeCare and Western Digital
Can any of the company-specific risk be diversified away by investing in both Addus HomeCare and Western Digital 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 Western Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Addus HomeCare and Western Digital, you can compare the effects of market volatilities on Addus HomeCare and Western Digital 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 Western Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Addus HomeCare and Western Digital.
Diversification Opportunities for Addus HomeCare and Western Digital
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Addus and Western is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and Western Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital 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 Western Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Digital has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and Western Digital go up and down completely randomly.
Pair Corralation between Addus HomeCare and Western Digital
Given the investment horizon of 90 days Addus HomeCare is expected to under-perform the Western Digital. But the stock apears to be less risky and, when comparing its historical volatility, Addus HomeCare is 1.33 times less risky than Western Digital. The stock trades about -0.06 of its potential returns per unit of risk. The Western Digital is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 6,971 in Western Digital on August 29, 2024 and sell it today you would earn a total of 141.00 from holding Western Digital or generate 2.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Addus HomeCare vs. Western Digital
Performance |
| Timeline |
| Addus HomeCare |
| Western Digital |
Addus HomeCare and Western Digital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Addus HomeCare and Western Digital
The main advantage of trading using opposite Addus HomeCare and Western Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Addus HomeCare position performs unexpectedly, Western Digital 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 Western Digital will offset losses from the drop in Western Digital'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 |
| Western Digital vs. NetApp Inc | Western Digital vs. Logitech International SA | Western Digital vs. HP Inc | Western Digital vs. Dell Technologies |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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