Correlation Between Addus HomeCare and KB HOME

Can any of the company-specific risk be diversified away by investing in both Addus HomeCare and KB HOME 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 Addus HomeCare and KB HOME into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Addus HomeCare and KB HOME, you can compare the effects of market volatilities on Addus HomeCare and KB HOME 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 Addus HomeCare with a short position of KB HOME. Check out your portfolio center. Please also check ongoing floating volatility patterns of Addus HomeCare and KB HOME.

Diversification Opportunities for Addus HomeCare and KB HOME

0.18

Correlation Coefficient

Addus HomeCare  KB HOME

Average diversification

The 3 months correlation between Addus and KBH is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and KB HOME in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB HOME and Addus HomeCare 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 Addus HomeCare are associated (or correlated) with KB HOME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KB HOME has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and KB HOME go up and down completely randomly.

Pair Corralation between Addus HomeCare and KB HOME

Assuming the 90 days horizon Addus HomeCare is expected to generate 0.88 times more return on investment than KB HOME. However, Addus HomeCare is 1.14 times less risky than KB HOME. It trades about 0.0 of its potential returns per unit of risk. KB HOME is currently generating about -0.02 per unit of risk. If you would invest  11,400  in Addus HomeCare on September 13, 2024 and sell it today you would lose (200.00) from holding Addus HomeCare or give up 1.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Addus HomeCare  vs.  KB HOME

Addus HomeCare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Addus HomeCare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Addus HomeCare is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

KB HOME

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KB HOME has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, KB HOME is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Addus HomeCare and KB HOME

The main advantage of trading using opposite Addus HomeCare and KB HOME positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Addus HomeCare position performs unexpectedly, KB HOME 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 KB HOME will offset losses from the drop in KB HOME's long position.

The idea behind Addus HomeCare and KB HOME 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.

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.