Correlation Between Addus HomeCare and AmerisourceBergen

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

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

Diversification Opportunities for Addus HomeCare and AmerisourceBergen

0.38

Correlation Coefficient

Addus HomeCare  AmerisourceBergen

Weak diversification

The 3 months correlation between Addus and AmerisourceBergen is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and AmerisourceBergen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AmerisourceBergen 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 AmerisourceBergen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AmerisourceBergen has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and AmerisourceBergen go up and down completely randomly.

Pair Corralation between Addus HomeCare and AmerisourceBergen

If you would invest  17,998  in AmerisourceBergen on January 20, 2024 and sell it today you would earn a total of  0.00  from holding AmerisourceBergen or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	4.55%
Values	Daily Returns

Addus HomeCare  vs.  AmerisourceBergen

Addus HomeCare

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Addus HomeCare are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Addus HomeCare may actually be approaching a critical reversion point that can send shares even higher in May 2024.

AmerisourceBergen

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Addus HomeCare and AmerisourceBergen

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

The idea behind Addus HomeCare and AmerisourceBergen 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.