Correlation Between Select Medical and Brookdale Senior
Can any of the company-specific risk be diversified away by investing in both Select 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 Select 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 Select Medical Holdings and Brookdale Senior Living, you can compare the effects of market volatilities on Select 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 Select Medical with a short position of Brookdale Senior. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select Medical and Brookdale Senior.
Diversification Opportunities for Select Medical and Brookdale Senior
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Select and Brookdale is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Select Medical Holdings 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 Select 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 Select Medical Holdings 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 Select Medical i.e., Select Medical and Brookdale Senior go up and down completely randomly.
Pair Corralation between Select Medical and Brookdale Senior
Considering the 90-day investment horizon Select Medical Holdings is expected to generate 0.77 times more return on investment than Brookdale Senior. However, Select Medical Holdings is 1.29 times less risky than Brookdale Senior. It trades about 0.12 of its potential returns per unit of risk. Brookdale Senior Living is currently generating about -0.11 per unit of risk. If you would invest 3,456 in Select Medical Holdings on August 28, 2024 and sell it today you would earn a total of 414.00 from holding Select Medical Holdings or generate 11.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Select Medical Holdings vs. Brookdale Senior Living
Performance |
| Timeline |
| Select Medical Holdings |
| Brookdale Senior Living |
Select Medical and Brookdale Senior Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Select Medical and Brookdale Senior
The main advantage of trading using opposite Select Medical and Brookdale Senior positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select 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.| Select Medical vs. The Ensign Group | Select Medical vs. Encompass Health Corp | Select Medical vs. InnovAge Holding Corp | Select Medical vs. Enhabit |
| Brookdale Senior vs. The Ensign Group | Brookdale Senior vs. Community Health Systems | Brookdale Senior vs. National HealthCare | Brookdale Senior vs. Mednax Inc |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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