Correlation Between Community Health and Brookdale Senior
Can any of the company-specific risk be diversified away by investing in both Community Health 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 Community Health and Brookdale Senior into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Community Health Systems and Brookdale Senior Living, you can compare the effects of market volatilities on Community Health 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 Community Health with a short position of Brookdale Senior. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community Health and Brookdale Senior.
Diversification Opportunities for Community Health and Brookdale Senior
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Community and Brookdale is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Community Health Systems 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 Community Health 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 Community Health Systems 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 Community Health i.e., Community Health and Brookdale Senior go up and down completely randomly.
Pair Corralation between Community Health and Brookdale Senior
Considering the 90-day investment horizon Community Health is expected to generate 1.84 times less return on investment than Brookdale Senior. In addition to that, Community Health is 1.41 times more volatile than Brookdale Senior Living. It trades about 0.02 of its total potential returns per unit of risk. Brookdale Senior Living is currently generating about 0.04 per unit of volatility. If you would invest 404.00 in Brookdale Senior Living on August 31, 2024 and sell it today you would earn a total of 164.00 from holding Brookdale Senior Living or generate 40.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Community Health Systems vs. Brookdale Senior Living
Performance |
| Timeline |
| Community Health Systems |
| Brookdale Senior Living |
Community Health and Brookdale Senior Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Community Health and Brookdale Senior
The main advantage of trading using opposite Community Health and Brookdale Senior positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community Health 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.| Community Health vs. Universal Health Services | Community Health vs. HCA Holdings | Community Health vs. Surgery Partners | Community Health vs. Acadia Healthcare |
| Brookdale Senior vs. Acadia Healthcare | Brookdale Senior vs. Select Medical Holdings | Brookdale Senior vs. Universal Health Services | Brookdale Senior vs. Prestige Brand Holdings |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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