Correlation Between Addus HomeCare and Shin Etsu

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

By analyzing existing cross correlation between Addus HomeCare and Shin Etsu Chemical Co, you can compare the effects of market volatilities on Addus HomeCare and Shin Etsu 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 Shin Etsu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Addus HomeCare and Shin Etsu.

Diversification Opportunities for Addus HomeCare and Shin Etsu

0.31

Correlation Coefficient

Addus HomeCare  Shin Etsu

Weak diversification

The 3 months correlation between Addus and Shin is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and Shin Etsu Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shin Etsu Chemical 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 Shin Etsu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shin Etsu Chemical has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and Shin Etsu go up and down completely randomly.

Pair Corralation between Addus HomeCare and Shin Etsu

Assuming the 90 days horizon Addus HomeCare is expected to generate 1.11 times more return on investment than Shin Etsu. However, Addus HomeCare is 1.11 times more volatile than Shin Etsu Chemical Co. It trades about 0.0 of its potential returns per unit of risk. Shin Etsu Chemical Co is currently generating about -0.04 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Addus HomeCare  vs.  Shin Etsu Chemical Co

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.

Shin Etsu Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Addus HomeCare and Shin Etsu

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

The idea behind Addus HomeCare and Shin Etsu Chemical Co 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.