Correlation Between Paragon 28 and Addus HomeCare

Can any of the company-specific risk be diversified away by investing in both Paragon 28 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 Paragon 28 and Addus HomeCare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Paragon 28 and Addus HomeCare, you can compare the effects of market volatilities on Paragon 28 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 Paragon 28 with a short position of Addus HomeCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paragon 28 and Addus HomeCare.

Diversification Opportunities for Paragon 28 and Addus HomeCare

-0.63

Correlation Coefficient

Paragon 28  Addus HomeCare

Excellent diversification

The 3 months correlation between Paragon and Addus is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Paragon 28 and Addus HomeCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addus HomeCare and Paragon 28 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 Paragon 28 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 Paragon 28 i.e., Paragon 28 and Addus HomeCare go up and down completely randomly.

Pair Corralation between Paragon 28 and Addus HomeCare

Considering the 90-day investment horizon Paragon 28 is expected to under-perform the Addus HomeCare. In addition to that, Paragon 28 is 2.75 times more volatile than Addus HomeCare. It trades about -0.1 of its total potential returns per unit of risk. Addus HomeCare is currently generating about 0.17 per unit of volatility. If you would invest  9,575  in Addus HomeCare on March 3, 2024 and sell it today you would earn a total of  1,906  from holding Addus HomeCare or generate 19.91% return on investment over 90 days.

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

Paragon 28  vs.  Addus HomeCare

Paragon 28

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paragon 28 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Addus HomeCare

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Addus HomeCare are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Addus HomeCare unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Paragon 28 and Addus HomeCare

The main advantage of trading using opposite Paragon 28 and Addus HomeCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paragon 28 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 Paragon 28 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.