Correlation Between Community Health and Sonida Senior
Can any of the company-specific risk be diversified away by investing in both Community Health and Sonida 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 Sonida 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 Sonida Senior Living, you can compare the effects of market volatilities on Community Health and Sonida 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 Sonida Senior. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community Health and Sonida Senior.
Diversification Opportunities for Community Health and Sonida Senior
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Community and Sonida is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Community Health Systems and Sonida Senior Living in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonida 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 Sonida Senior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonida Senior Living has no effect on the direction of Community Health i.e., Community Health and Sonida Senior go up and down completely randomly.
Pair Corralation between Community Health and Sonida Senior
Considering the 90-day investment horizon Community Health Systems is expected to under-perform the Sonida Senior. But the stock apears to be less risky and, when comparing its historical volatility, Community Health Systems is 1.0 times less risky than Sonida Senior. The stock trades about -0.18 of its potential returns per unit of risk. The Sonida Senior Living is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 2,672 in Sonida Senior Living on August 29, 2024 and sell it today you would lose (67.00) from holding Sonida Senior Living or give up 2.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Community Health Systems vs. Sonida Senior Living
Performance |
| Timeline |
| Community Health Systems |
| Sonida Senior Living |
Community Health and Sonida Senior Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Community Health and Sonida Senior
The main advantage of trading using opposite Community Health and Sonida Senior positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community Health position performs unexpectedly, Sonida 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 Sonida Senior will offset losses from the drop in Sonida 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 |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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