Correlation Between Healthcare Services and Acadia Healthcare
Can any of the company-specific risk be diversified away by investing in both Healthcare Services and Acadia Healthcare 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 Healthcare Services and Acadia Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Healthcare Services Group and Acadia Healthcare, you can compare the effects of market volatilities on Healthcare Services and Acadia Healthcare 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 Healthcare Services with a short position of Acadia Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Healthcare Services and Acadia Healthcare.
Diversification Opportunities for Healthcare Services and Acadia Healthcare
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Healthcare and Acadia is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Healthcare Services Group and Acadia Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acadia Healthcare and Healthcare Services 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 Healthcare Services Group are associated (or correlated) with Acadia Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acadia Healthcare has no effect on the direction of Healthcare Services i.e., Healthcare Services and Acadia Healthcare go up and down completely randomly.
Pair Corralation between Healthcare Services and Acadia Healthcare
Given the investment horizon of 90 days Healthcare Services Group is expected to generate 0.44 times more return on investment than Acadia Healthcare. However, Healthcare Services Group is 2.25 times less risky than Acadia Healthcare. It trades about 0.23 of its potential returns per unit of risk. Acadia Healthcare is currently generating about -0.2 per unit of risk. If you would invest 1,102 in Healthcare Services Group on August 30, 2024 and sell it today you would earn a total of 111.00 from holding Healthcare Services Group or generate 10.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Healthcare Services Group vs. Acadia Healthcare
Performance |
| Timeline |
| Healthcare Services |
| Acadia Healthcare |
Healthcare Services and Acadia Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Healthcare Services and Acadia Healthcare
The main advantage of trading using opposite Healthcare Services and Acadia Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Healthcare Services position performs unexpectedly, Acadia Healthcare 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 Acadia Healthcare will offset losses from the drop in Acadia Healthcare's long position.| Healthcare Services vs. Pennant Group | Healthcare Services vs. Surgery Partners | Healthcare Services vs. The Ensign Group | Healthcare Services vs. Encompass Health Corp |
| Acadia Healthcare vs. Encompass Health Corp | Acadia Healthcare vs. Pennant Group | Acadia Healthcare vs. Select Medical Holdings | Acadia Healthcare vs. Addus HomeCare |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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