Correlation Between Mustang Bio and Addus HomeCare

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

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

Diversification Opportunities for Mustang Bio and Addus HomeCare

-0.6

Correlation Coefficient

Mustang Bio  Addus HomeCare

Excellent diversification

The 3 months correlation between Mustang and Addus is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Mustang Bio and Addus HomeCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addus HomeCare and Mustang Bio 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 Mustang Bio 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 Mustang Bio i.e., Mustang Bio and Addus HomeCare go up and down completely randomly.

Pair Corralation between Mustang Bio and Addus HomeCare

Given the investment horizon of 90 days Mustang Bio is expected to under-perform the Addus HomeCare. In addition to that, Mustang Bio is 3.01 times more volatile than Addus HomeCare. It trades about -0.18 of its total potential returns per unit of risk. Addus HomeCare is currently generating about 0.09 per unit of volatility. If you would invest  7,989  in Addus HomeCare on January 19, 2024 and sell it today you would earn a total of  1,727  from holding Addus HomeCare or generate 21.62% return on investment over 90 days.

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

Mustang Bio  vs.  Addus HomeCare

Mustang Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mustang Bio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

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 weak basic indicators, Addus HomeCare may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Mustang Bio and Addus HomeCare

The main advantage of trading using opposite Mustang Bio and Addus HomeCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mustang Bio 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 Mustang Bio 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.