Correlation Between Brookdale Senior and Tenet Healthcare
Can any of the company-specific risk be diversified away by investing in both Brookdale Senior and Tenet Healthcare 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 Tenet Healthcare 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 Tenet Healthcare, you can compare the effects of market volatilities on Brookdale Senior and Tenet Healthcare 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 Tenet Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookdale Senior and Tenet Healthcare.
Diversification Opportunities for Brookdale Senior and Tenet Healthcare
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Brookdale and Tenet is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Brookdale Senior Living and Tenet Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tenet Healthcare 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 Tenet Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tenet Healthcare has no effect on the direction of Brookdale Senior i.e., Brookdale Senior and Tenet Healthcare go up and down completely randomly.
Pair Corralation between Brookdale Senior and Tenet Healthcare
Considering the 90-day investment horizon Brookdale Senior Living is expected to under-perform the Tenet Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Brookdale Senior Living is 1.09 times less risky than Tenet Healthcare. The stock trades about -0.1 of its potential returns per unit of risk. The Tenet Healthcare is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 12,964 in Tenet Healthcare on October 24, 2024 and sell it today you would earn a total of 479.00 from holding Tenet Healthcare or generate 3.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brookdale Senior Living vs. Tenet Healthcare
Performance |
| Timeline |
| Brookdale Senior Living |
| Tenet Healthcare |
Brookdale Senior and Tenet Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brookdale Senior and Tenet Healthcare
The main advantage of trading using opposite Brookdale Senior and Tenet Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookdale Senior position performs unexpectedly, Tenet Healthcare 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 Tenet Healthcare will offset losses from the drop in Tenet Healthcare'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 |
| Tenet Healthcare vs. Acadia Healthcare | Tenet Healthcare vs. HCA Holdings | Tenet Healthcare vs. US Physicalrapy | Tenet Healthcare vs. DaVita HealthCare Partners |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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