Correlation Between Sonida Senior and Community Health
Can any of the company-specific risk be diversified away by investing in both Sonida Senior and Community Health 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 Sonida Senior and Community Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sonida Senior Living and Community Health Systems, you can compare the effects of market volatilities on Sonida Senior and Community Health 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 Sonida Senior with a short position of Community Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonida Senior and Community Health.
Diversification Opportunities for Sonida Senior and Community Health
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sonida and Community is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Sonida Senior Living and Community Health Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Health Systems and Sonida Senior 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 Sonida Senior Living are associated (or correlated) with Community Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Health Systems has no effect on the direction of Sonida Senior i.e., Sonida Senior and Community Health go up and down completely randomly.
Pair Corralation between Sonida Senior and Community Health
Given the investment horizon of 90 days Sonida Senior is expected to generate 3.35 times less return on investment than Community Health. But when comparing it to its historical volatility, Sonida Senior Living is 1.15 times less risky than Community Health. It trades about 0.03 of its potential returns per unit of risk. Community Health Systems is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 307.00 in Community Health Systems on November 3, 2024 and sell it today you would earn a total of 13.00 from holding Community Health Systems or generate 4.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sonida Senior Living vs. Community Health Systems
Performance |
| Timeline |
| Sonida Senior Living |
| Community Health Systems |
Sonida Senior and Community Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sonida Senior and Community Health
The main advantage of trading using opposite Sonida Senior and Community Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sonida Senior position performs unexpectedly, Community Health 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 Community Health will offset losses from the drop in Community Health's long position.| Sonida Senior vs. Select Medical Holdings | Sonida Senior vs. Encompass Health Corp | Sonida Senior vs. Pennant Group | Sonida Senior vs. InnovAge Holding Corp |
| 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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