Correlation Between Encompass Health and Sonida Senior
Can any of the company-specific risk be diversified away by investing in both Encompass 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 Encompass 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 Encompass Health Corp and Sonida Senior Living, you can compare the effects of market volatilities on Encompass 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 Encompass Health with a short position of Sonida Senior. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encompass Health and Sonida Senior.
Diversification Opportunities for Encompass Health and Sonida Senior
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Encompass and Sonida is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Encompass Health Corp 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 Encompass 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 Encompass Health Corp 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 Encompass Health i.e., Encompass Health and Sonida Senior go up and down completely randomly.
Pair Corralation between Encompass Health and Sonida Senior
Considering the 90-day investment horizon Encompass Health Corp is expected to generate 0.49 times more return on investment than Sonida Senior. However, Encompass Health Corp is 2.03 times less risky than Sonida Senior. It trades about 0.33 of its potential returns per unit of risk. Sonida Senior Living is currently generating about 0.11 per unit of risk. If you would invest 9,185 in Encompass Health Corp on November 2, 2024 and sell it today you would earn a total of 656.00 from holding Encompass Health Corp or generate 7.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Encompass Health Corp vs. Sonida Senior Living
Performance |
| Timeline |
| Encompass Health Corp |
| Sonida Senior Living |
Encompass Health and Sonida Senior Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encompass Health and Sonida Senior
The main advantage of trading using opposite Encompass Health and Sonida Senior positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encompass 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.| Encompass Health vs. Pennant Group | Encompass Health vs. The Ensign Group | Encompass Health vs. InnovAge Holding Corp | Encompass Health vs. ModivCare |
| Sonida Senior vs. Select Medical Holdings | Sonida Senior vs. Encompass Health Corp | Sonida Senior vs. Pennant Group | Sonida Senior vs. InnovAge Holding Corp |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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