Correlation Between Addus HomeCare and Ensign

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

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

Diversification Opportunities for Addus HomeCare and Ensign

0.36

Correlation Coefficient

Addus HomeCare  Ensign

Weak diversification

The 3 months correlation between Addus and Ensign is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and The Ensign Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ensign Group 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 Ensign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ensign Group has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and Ensign go up and down completely randomly.

Pair Corralation between Addus HomeCare and Ensign

Given the investment horizon of 90 days Addus HomeCare is expected to under-perform the Ensign. In addition to that, Addus HomeCare is 1.62 times more volatile than The Ensign Group. It trades about -0.09 of its total potential returns per unit of risk. The Ensign Group is currently generating about -0.09 per unit of volatility. If you would invest  11,972  in The Ensign Group on February 5, 2024 and sell it today you would lose (283.00) from holding The Ensign Group or give up 2.36% of portfolio value over 90 days.

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

Addus HomeCare  vs.  The Ensign Group

Addus HomeCare

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Addus HomeCare are ranked lower than 6 (%) 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 June 2024.

Ensign Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Ensign Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Ensign is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Addus HomeCare and Ensign

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

The idea behind Addus HomeCare and The Ensign Group 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.