Correlation Between CenterPoint Energy and Addus HomeCare

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

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

Diversification Opportunities for CenterPoint Energy and Addus HomeCare

-0.6

Correlation Coefficient

CenterPoint Energy  Addus HomeCare

Excellent diversification

The 3 months correlation between CenterPoint and Addus is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding CenterPoint Energy and Addus HomeCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addus HomeCare and CenterPoint Energy 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 CenterPoint Energy are associated (or correlated) with Addus HomeCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Addus HomeCare has no effect on the direction of CenterPoint Energy i.e., CenterPoint Energy and Addus HomeCare go up and down completely randomly.

Pair Corralation between CenterPoint Energy and Addus HomeCare

Considering the 90-day investment horizon CenterPoint Energy is expected to generate 2.11 times less return on investment than Addus HomeCare. But when comparing it to its historical volatility, CenterPoint Energy is 1.71 times less risky than Addus HomeCare. It trades about 0.03 of its potential returns per unit of risk. Addus HomeCare is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  9,930  in Addus HomeCare on September 23, 2024 and sell it today you would earn a total of  3,210  from holding Addus HomeCare or generate 32.33% return on investment over 90 days.

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

CenterPoint Energy  vs.  Addus HomeCare

CenterPoint Energy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CenterPoint Energy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, CenterPoint Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with CenterPoint Energy and Addus HomeCare

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

The idea behind CenterPoint Energy and Addus HomeCare 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.