Correlation Between Brookdale Senior and Community Health
Can any of the company-specific risk be diversified away by investing in both Brookdale Senior and Community Health 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 Brookdale Senior and Community Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brookdale Senior Living and Community Health Systems, you can compare the effects of market volatilities on Brookdale Senior and Community Health 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 Brookdale Senior with a short position of Community Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookdale Senior and Community Health.
Diversification Opportunities for Brookdale Senior and Community Health
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Brookdale and Community is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Brookdale Senior Living and Community Health Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Health Systems and Brookdale Senior 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 Brookdale Senior Living are associated (or correlated) with Community Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Health Systems has no effect on the direction of Brookdale Senior i.e., Brookdale Senior and Community Health go up and down completely randomly.
Pair Corralation between Brookdale Senior and Community Health
Considering the 90-day investment horizon Brookdale Senior Living is expected to generate 1.18 times more return on investment than Community Health. However, Brookdale Senior is 1.18 times more volatile than Community Health Systems. It trades about -0.12 of its potential returns per unit of risk. Community Health Systems is currently generating about -0.26 per unit of risk. If you would invest 627.00 in Brookdale Senior Living on September 1, 2024 and sell it today you would lose (59.00) from holding Brookdale Senior Living or give up 9.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brookdale Senior Living vs. Community Health Systems
Performance |
| Timeline |
| Brookdale Senior Living |
| Community Health Systems |
Brookdale Senior and Community Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brookdale Senior and Community Health
The main advantage of trading using opposite Brookdale Senior and Community Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookdale Senior position performs unexpectedly, Community Health 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 Community Health will offset losses from the drop in Community Health's long position.| Brookdale Senior vs. The Ensign Group | Brookdale Senior vs. Community Health Systems | Brookdale Senior vs. National HealthCare | Brookdale Senior vs. Mednax Inc |
| Community Health vs. Universal Health Services | Community Health vs. HCA Holdings | Community Health vs. Surgery Partners | Community Health vs. Acadia Healthcare |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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