Correlation Between Addus HomeCare and Summit Midstream

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

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

Diversification Opportunities for Addus HomeCare and Summit Midstream

-0.49

Correlation Coefficient

Addus HomeCare  Summit Midstream

Very good diversification

The 3 months correlation between Addus and Summit is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and Summit Midstream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Midstream 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 Summit Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Midstream has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and Summit Midstream go up and down completely randomly.

Pair Corralation between Addus HomeCare and Summit Midstream

Given the investment horizon of 90 days Addus HomeCare is expected to generate 0.8 times more return on investment than Summit Midstream. However, Addus HomeCare is 1.25 times less risky than Summit Midstream. It trades about 0.0 of its potential returns per unit of risk. Summit Midstream is currently generating about -0.01 per unit of risk. If you would invest  13,284  in Addus HomeCare on September 23, 2024 and sell it today you would lose (144.00) from holding Addus HomeCare or give up 1.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Addus HomeCare  vs.  Summit Midstream

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.

Summit Midstream

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Summit Midstream has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Summit Midstream is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Addus HomeCare and Summit Midstream

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

The idea behind Addus HomeCare and Summit Midstream 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.