Correlation Between Addus HomeCare and DaVita HealthCare

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

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

Diversification Opportunities for Addus HomeCare and DaVita HealthCare

0.15

Correlation Coefficient

Addus HomeCare  DaVita HealthCare

Average diversification

The 3 months correlation between Addus and DaVita is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and DaVita HealthCare Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DaVita HealthCare 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 DaVita HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DaVita HealthCare has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and DaVita HealthCare go up and down completely randomly.

Pair Corralation between Addus HomeCare and DaVita HealthCare

Given the investment horizon of 90 days Addus HomeCare is expected to generate 1.0 times more return on investment than DaVita HealthCare. However, Addus HomeCare is 1.0 times less risky than DaVita HealthCare. It trades about 0.08 of its potential returns per unit of risk. DaVita HealthCare Partners is currently generating about -0.02 per unit of risk. If you would invest  12,207  in Addus HomeCare on September 15, 2024 and sell it today you would earn a total of  293.00  from holding Addus HomeCare or generate 2.4% return on investment over 90 days.

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

Addus HomeCare  vs.  DaVita HealthCare Partners

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.

DaVita HealthCare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DaVita HealthCare Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Addus HomeCare and DaVita HealthCare

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

The idea behind Addus HomeCare and DaVita HealthCare Partners 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.