Correlation Between Addus HomeCare and Axogen

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

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

Diversification Opportunities for Addus HomeCare and Axogen

-0.61

Correlation Coefficient

Addus HomeCare  Axogen

Excellent diversification

The 3 months correlation between Addus and Axogen is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and Axogen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axogen Inc 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 Axogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axogen Inc has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and Axogen go up and down completely randomly.

Pair Corralation between Addus HomeCare and Axogen

Given the investment horizon of 90 days Addus HomeCare is expected to generate 0.59 times more return on investment than Axogen. However, Addus HomeCare is 1.68 times less risky than Axogen. It trades about -0.24 of its potential returns per unit of risk. Axogen Inc is currently generating about -0.27 per unit of risk. If you would invest  10,318  in Addus HomeCare on January 31, 2024 and sell it today you would lose (900.00) from holding Addus HomeCare or give up 8.72% of portfolio value over 90 days.

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

Addus HomeCare  vs.  Axogen Inc

Addus HomeCare

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Addus HomeCare are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Addus HomeCare may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Axogen Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Axogen Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental 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.

Pair Trading with Addus HomeCare and Axogen

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

The idea behind Addus HomeCare and Axogen 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.