Correlation Between Acadia Healthcare and Brookdale Senior
Can any of the company-specific risk be diversified away by investing in both Acadia Healthcare and Brookdale Senior 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 Brookdale Senior into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Acadia Healthcare and Brookdale Senior Living, you can compare the effects of market volatilities on Acadia Healthcare and Brookdale Senior 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 Brookdale Senior. Check out your portfolio center. Please also check ongoing floating volatility patterns of Acadia Healthcare and Brookdale Senior.
Diversification Opportunities for Acadia Healthcare and Brookdale Senior
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Acadia and Brookdale is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Acadia Healthcare and Brookdale Senior Living in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookdale Senior Living 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 Brookdale Senior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookdale Senior Living has no effect on the direction of Acadia Healthcare i.e., Acadia Healthcare and Brookdale Senior go up and down completely randomly.
Pair Corralation between Acadia Healthcare and Brookdale Senior
Given the investment horizon of 90 days Acadia Healthcare is expected to under-perform the Brookdale Senior. But the stock apears to be less risky and, when comparing its historical volatility, Acadia Healthcare is 1.53 times less risky than Brookdale Senior. The stock trades about -0.06 of its potential returns per unit of risk. The Brookdale Senior Living is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 334.00 in Brookdale Senior Living on August 24, 2024 and sell it today you would earn a total of 214.00 from holding Brookdale Senior Living or generate 64.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Acadia Healthcare vs. Brookdale Senior Living
Performance |
| Timeline |
| Acadia Healthcare |
| Brookdale Senior Living |
Acadia Healthcare and Brookdale Senior Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Acadia Healthcare and Brookdale Senior
The main advantage of trading using opposite Acadia Healthcare and Brookdale Senior positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Acadia Healthcare position performs unexpectedly, Brookdale Senior 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 Brookdale Senior will offset losses from the drop in Brookdale Senior's long position.| Acadia Healthcare vs. Encompass Health Corp | Acadia Healthcare vs. Pennant Group | Acadia Healthcare vs. Select Medical Holdings | Acadia Healthcare vs. Addus HomeCare |
| Brookdale Senior vs. Addus HomeCare | Brookdale Senior vs. Morningstar Unconstrained Allocation | Brookdale Senior vs. SEI Investments | Brookdale Senior vs. Goosehead Insurance |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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