Correlation Between Lifestance Health and Addus HomeCare

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

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

Diversification Opportunities for Lifestance Health and Addus HomeCare

-0.28

Correlation Coefficient

Lifestance Health  Addus HomeCare

Very good diversification

The 3 months correlation between Lifestance and Addus is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Lifestance Health Group and Addus HomeCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addus HomeCare and Lifestance Health 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 Lifestance Health Group 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 Lifestance Health i.e., Lifestance Health and Addus HomeCare go up and down completely randomly.

Pair Corralation between Lifestance Health and Addus HomeCare

Given the investment horizon of 90 days Lifestance Health Group is expected to generate 1.37 times more return on investment than Addus HomeCare. However, Lifestance Health is 1.37 times more volatile than Addus HomeCare. It trades about 0.04 of its potential returns per unit of risk. Addus HomeCare is currently generating about -0.01 per unit of risk. If you would invest  694.00  in Lifestance Health Group on September 27, 2024 and sell it today you would earn a total of  35.00  from holding Lifestance Health Group or generate 5.04% return on investment over 90 days.

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

Lifestance Health Group  vs.  Addus HomeCare

Lifestance Health

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lifestance Health Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Lifestance Health 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 recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Lifestance Health and Addus HomeCare

The main advantage of trading using opposite Lifestance Health and Addus HomeCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifestance Health 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 Lifestance Health Group 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..