Correlation Between Addus HomeCare and IDEXX Laboratories

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

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

Diversification Opportunities for Addus HomeCare and IDEXX Laboratories

0.81

Correlation Coefficient

Addus HomeCare  IDEXX Laboratories

Very poor diversification

The 3 months correlation between Addus and IDEXX is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and IDEXX Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDEXX Laboratories 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 IDEXX Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDEXX Laboratories has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and IDEXX Laboratories go up and down completely randomly.

Pair Corralation between Addus HomeCare and IDEXX Laboratories

Assuming the 90 days horizon Addus HomeCare is expected to generate 1.93 times less return on investment than IDEXX Laboratories. But when comparing it to its historical volatility, Addus HomeCare is 1.12 times less risky than IDEXX Laboratories. It trades about 0.11 of its potential returns per unit of risk. IDEXX Laboratories is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  35,500  in IDEXX Laboratories on April 21, 2025 and sell it today you would earn a total of  9,060  from holding IDEXX Laboratories or generate 25.52% return on investment over 90 days.

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

Addus HomeCare  vs.  IDEXX Laboratories

Addus HomeCare

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Addus HomeCare are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Addus HomeCare may actually be approaching a critical reversion point that can send shares even higher in August 2025.

IDEXX Laboratories

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IDEXX Laboratories are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, IDEXX Laboratories reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Addus HomeCare and IDEXX Laboratories

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

The idea behind Addus HomeCare and IDEXX Laboratories 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.