Correlation Between Central Garden and Addus HomeCare
Can any of the company-specific risk be diversified away by investing in both Central Garden and Addus HomeCare 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 Central Garden and Addus HomeCare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Central Garden Pet and Addus HomeCare, you can compare the effects of market volatilities on Central Garden and Addus HomeCare 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 Central Garden with a short position of Addus HomeCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Garden and Addus HomeCare.
Diversification Opportunities for Central Garden and Addus HomeCare
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Central and Addus is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Central Garden Pet and Addus HomeCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addus HomeCare and Central Garden 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 Central Garden Pet are associated (or correlated) with Addus HomeCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Addus HomeCare has no effect on the direction of Central Garden i.e., Central Garden and Addus HomeCare go up and down completely randomly.
Pair Corralation between Central Garden and Addus HomeCare
Assuming the 90 days horizon Central Garden is expected to generate 1.37 times less return on investment than Addus HomeCare. But when comparing it to its historical volatility, Central Garden Pet is 1.14 times less risky than Addus HomeCare. It trades about 0.03 of its potential returns per unit of risk. Addus HomeCare is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 10,003 in Addus HomeCare on September 19, 2024 and sell it today you would earn a total of 2,972 from holding Addus HomeCare or generate 29.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Central Garden Pet vs. Addus HomeCare
Performance |
| Timeline |
| Central Garden Pet |
| Addus HomeCare |
Central Garden and Addus HomeCare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Central Garden and Addus HomeCare
The main advantage of trading using opposite Central Garden and Addus HomeCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Garden position performs unexpectedly, Addus HomeCare 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 Addus HomeCare will offset losses from the drop in Addus HomeCare's long position.| Central Garden vs. Seneca Foods Corp | Central Garden vs. Natures Sunshine Products | Central Garden vs. J J Snack | Central Garden vs. Central Garden Pet |
| Addus HomeCare vs. ASGN Inc | Addus HomeCare vs. Kforce Inc | Addus HomeCare vs. Kelly Services A | Addus HomeCare vs. Central Garden Pet |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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