Correlation Between Toro and Addus HomeCare
Can any of the company-specific risk be diversified away by investing in both Toro 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 Toro and Addus HomeCare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Toro Co and Addus HomeCare, you can compare the effects of market volatilities on Toro 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 Toro with a short position of Addus HomeCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toro and Addus HomeCare.
Diversification Opportunities for Toro and Addus HomeCare
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Toro and Addus is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Toro Co and Addus HomeCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addus HomeCare and Toro 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 Toro Co 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 Toro i.e., Toro and Addus HomeCare go up and down completely randomly.
Pair Corralation between Toro and Addus HomeCare
Considering the 90-day investment horizon Toro is expected to generate 3.59 times less return on investment than Addus HomeCare. In addition to that, Toro is 1.13 times more volatile than Addus HomeCare. It trades about 0.02 of its total potential returns per unit of risk. Addus HomeCare is currently generating about 0.08 per unit of volatility. If you would invest 8,935 in Addus HomeCare on September 2, 2024 and sell it today you would earn a total of 3,349 from holding Addus HomeCare or generate 37.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toro Co vs. Addus HomeCare
Performance |
| Timeline |
| Toro |
| Addus HomeCare |
Toro and Addus HomeCare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toro and Addus HomeCare
The main advantage of trading using opposite Toro and Addus HomeCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toro 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.The idea behind Toro Co and Addus HomeCare pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Addus HomeCare vs. Encompass Health Corp | Addus HomeCare vs. Pennant Group | Addus HomeCare vs. Acadia Healthcare | Addus HomeCare vs. Select Medical Holdings |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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