Correlation Between Addus HomeCare and Abacus Life

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

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

Diversification Opportunities for Addus HomeCare and Abacus Life

0.59

Correlation Coefficient

Addus HomeCare  Abacus Life

Very weak diversification

The 3 months correlation between Addus and Abacus is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and Abacus Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abacus Life 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 Abacus Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abacus Life has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and Abacus Life go up and down completely randomly.

Pair Corralation between Addus HomeCare and Abacus Life

Given the investment horizon of 90 days Addus HomeCare is expected to generate 2.4 times less return on investment than Abacus Life. But when comparing it to its historical volatility, Addus HomeCare is 4.02 times less risky than Abacus Life. It trades about 0.08 of its potential returns per unit of risk. Abacus Life is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  85.00  in Abacus Life on September 25, 2024 and sell it today you would earn a total of  25.00  from holding Abacus Life or generate 29.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

Addus HomeCare  vs.  Abacus Life

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. In spite of comparatively stable basic indicators, Addus HomeCare is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Abacus Life

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Abacus Life has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's essential indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Addus HomeCare and Abacus Life

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

The idea behind Addus HomeCare and Abacus Life 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.