Correlation Between Outset Medical and Addus HomeCare

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

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

Diversification Opportunities for Outset Medical and Addus HomeCare

-0.53

Correlation Coefficient

Outset Medical  Addus HomeCare

Excellent diversification

The 3 months correlation between Outset and Addus is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Outset Medical and Addus HomeCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addus HomeCare and Outset Medical 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 Outset Medical 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 Outset Medical i.e., Outset Medical and Addus HomeCare go up and down completely randomly.

Pair Corralation between Outset Medical and Addus HomeCare

Allowing for the 90-day total investment horizon Outset Medical is expected to generate 4.14 times more return on investment than Addus HomeCare. However, Outset Medical is 4.14 times more volatile than Addus HomeCare. It trades about 0.21 of its potential returns per unit of risk. Addus HomeCare is currently generating about -0.01 per unit of risk. If you would invest  54.00  in Outset Medical on September 24, 2024 and sell it today you would earn a total of  67.00  from holding Outset Medical or generate 124.07% return on investment over 90 days.

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

Outset Medical  vs.  Addus HomeCare

Outset Medical

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Outset Medical are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent primary indicators, Outset Medical displayed solid returns over the last few months and may actually be approaching a breakup point.

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 Outset Medical and Addus HomeCare

The main advantage of trading using opposite Outset Medical and Addus HomeCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Outset Medical 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 Outset Medical 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.