Correlation Between Laboratory and Acadia Healthcare
Can any of the company-specific risk be diversified away by investing in both Laboratory 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 Laboratory and Acadia Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Laboratory of and Acadia Healthcare, you can compare the effects of market volatilities on Laboratory 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 Laboratory with a short position of Acadia Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Laboratory and Acadia Healthcare.
Diversification Opportunities for Laboratory and Acadia Healthcare
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Laboratory and Acadia is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Laboratory of and Acadia Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acadia Healthcare and Laboratory 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 Laboratory of 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 Laboratory i.e., Laboratory and Acadia Healthcare go up and down completely randomly.
Pair Corralation between Laboratory and Acadia Healthcare
Allowing for the 90-day total investment horizon Laboratory of is expected to generate 0.56 times more return on investment than Acadia Healthcare. However, Laboratory of is 1.79 times less risky than Acadia Healthcare. It trades about 0.04 of its potential returns per unit of risk. Acadia Healthcare is currently generating about -0.06 per unit of risk. If you would invest 19,844 in Laboratory of on August 24, 2024 and sell it today you would earn a total of 4,173 from holding Laboratory of or generate 21.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Laboratory of vs. Acadia Healthcare
Performance |
| Timeline |
| Laboratory |
| Acadia Healthcare |
Laboratory and Acadia Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Laboratory and Acadia Healthcare
The main advantage of trading using opposite Laboratory and Acadia Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Laboratory 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.| Laboratory vs. Quest Diagnostics Incorporated | Laboratory vs. Waters | Laboratory vs. Universal Health Services | Laboratory vs. Humana Inc |
| 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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