Correlation Between Fresenius Medical and Brookdale Senior
Can any of the company-specific risk be diversified away by investing in both Fresenius Medical 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 Fresenius Medical and Brookdale Senior into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fresenius Medical Care and Brookdale Senior Living, you can compare the effects of market volatilities on Fresenius Medical 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 Fresenius Medical with a short position of Brookdale Senior. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fresenius Medical and Brookdale Senior.
Diversification Opportunities for Fresenius Medical and Brookdale Senior
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Fresenius and Brookdale is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Fresenius Medical Care 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 Fresenius Medical 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 Fresenius Medical Care 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 Fresenius Medical i.e., Fresenius Medical and Brookdale Senior go up and down completely randomly.
Pair Corralation between Fresenius Medical and Brookdale Senior
Assuming the 90 days trading horizon Fresenius Medical Care is expected to generate 0.55 times more return on investment than Brookdale Senior. However, Fresenius Medical Care is 1.83 times less risky than Brookdale Senior. It trades about 0.14 of its potential returns per unit of risk. Brookdale Senior Living is currently generating about -0.06 per unit of risk. If you would invest 3,819 in Fresenius Medical Care on August 30, 2024 and sell it today you would earn a total of 433.00 from holding Fresenius Medical Care or generate 11.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 97.73% |
| Values | Daily Returns |
Fresenius Medical Care vs. Brookdale Senior Living
Performance |
| Timeline |
| Fresenius Medical Care |
| Brookdale Senior Living |
Fresenius Medical and Brookdale Senior Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fresenius Medical and Brookdale Senior
The main advantage of trading using opposite Fresenius Medical and Brookdale Senior positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fresenius Medical 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.The idea behind Fresenius Medical Care and Brookdale Senior Living pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Brookdale Senior vs. ALGOMA STEEL GROUP | Brookdale Senior vs. LEGACY IRON ORE | Brookdale Senior vs. ABO GROUP ENVIRONMENT | Brookdale Senior vs. Nippon Steel |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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