Correlation Between Addus HomeCare and Foxx Development

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

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

Diversification Opportunities for Addus HomeCare and Foxx Development

0.66

Correlation Coefficient

Addus HomeCare  Foxx Development

Poor diversification

The 3 months correlation between Addus and Foxx is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and Foxx Development Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foxx Development Holdings 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 Foxx Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foxx Development Holdings has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and Foxx Development go up and down completely randomly.

Pair Corralation between Addus HomeCare and Foxx Development

Given the investment horizon of 90 days Addus HomeCare is expected to generate 0.16 times more return on investment than Foxx Development. However, Addus HomeCare is 6.19 times less risky than Foxx Development. It trades about -0.01 of its potential returns per unit of risk. Foxx Development Holdings is currently generating about -0.07 per unit of risk. If you would invest  13,183  in Addus HomeCare on September 26, 2024 and sell it today you would lose (294.00) from holding Addus HomeCare or give up 2.23% of portfolio value over 90 days.

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

Addus HomeCare  vs.  Foxx Development Holdings

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Foxx Development Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Foxx Development Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Addus HomeCare and Foxx Development

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

The idea behind Addus HomeCare and Foxx Development Holdings 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.