Correlation Between Acadia Healthcare and DexCom

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

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

Diversification Opportunities for Acadia Healthcare and DexCom

-0.71

Correlation Coefficient

Acadia Healthcare  DexCom

Pay attention - limited upside

The 3 months correlation between Acadia and DexCom is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Acadia Healthcare and DexCom Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DexCom Inc and Acadia Healthcare 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 Acadia Healthcare are associated (or correlated) with DexCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DexCom Inc has no effect on the direction of Acadia Healthcare i.e., Acadia Healthcare and DexCom go up and down completely randomly.

Pair Corralation between Acadia Healthcare and DexCom

Given the investment horizon of 90 days Acadia Healthcare is expected to generate 0.46 times more return on investment than DexCom. However, Acadia Healthcare is 2.19 times less risky than DexCom. It trades about -0.06 of its potential returns per unit of risk. DexCom Inc is currently generating about -0.14 per unit of risk. If you would invest  7,607  in Acadia Healthcare on January 31, 2024 and sell it today you would lose (146.00) from holding Acadia Healthcare or give up 1.92% of portfolio value over 90 days.

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

Acadia Healthcare  vs.  DexCom Inc

Acadia Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acadia Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

DexCom Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DexCom Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, DexCom is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Acadia Healthcare and DexCom

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

The idea behind Acadia Healthcare and DexCom Inc 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.