Correlation Between HK Electric and Addus HomeCare
Can any of the company-specific risk be diversified away by investing in both HK Electric 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 HK Electric and Addus HomeCare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HK Electric Investments and Addus HomeCare, you can compare the effects of market volatilities on HK Electric 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 HK Electric with a short position of Addus HomeCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of HK Electric and Addus HomeCare.
Diversification Opportunities for HK Electric and Addus HomeCare
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HKT and Addus is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and Addus HomeCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addus HomeCare and HK Electric 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 HK Electric Investments 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 HK Electric i.e., HK Electric and Addus HomeCare go up and down completely randomly.
Pair Corralation between HK Electric and Addus HomeCare
Assuming the 90 days trading horizon HK Electric is expected to generate 2.3 times less return on investment than Addus HomeCare. But when comparing it to its historical volatility, HK Electric Investments is 2.44 times less risky than Addus HomeCare. It trades about 0.11 of its potential returns per unit of risk. Addus HomeCare is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 11,300 in Addus HomeCare on October 30, 2024 and sell it today you would earn a total of 800.00 from holding Addus HomeCare or generate 7.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HK Electric Investments vs. Addus HomeCare
Performance |
| Timeline |
| HK Electric Investments |
| Addus HomeCare |
HK Electric and Addus HomeCare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HK Electric and Addus HomeCare
The main advantage of trading using opposite HK Electric and Addus HomeCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HK Electric 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.| HK Electric vs. Universal Entertainment | HK Electric vs. COSMOSTEEL HLDGS | HK Electric vs. SOLSTAD OFFSHORE NK | HK Electric vs. PT Global Mediacom |
| Addus HomeCare vs. Fresenius Medical Care | Addus HomeCare vs. Chemed | Addus HomeCare vs. Superior Plus Corp | Addus HomeCare vs. Origin Agritech |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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