Correlation Between GENERAL and Sonida Senior

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Can any of the company-specific risk be diversified away by investing in both GENERAL 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 GENERAL and Sonida Senior into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GENERAL ELEC CAP and Sonida Senior Living, you can compare the effects of market volatilities on GENERAL 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 GENERAL with a short position of Sonida Senior. Check out your portfolio center. Please also check ongoing floating volatility patterns of GENERAL and Sonida Senior.

Diversification Opportunities for GENERAL and Sonida Senior

-0.15
  Correlation Coefficient

Good diversification

The 3 months correlation between GENERAL and Sonida is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding GENERAL ELEC CAP 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 GENERAL 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 GENERAL ELEC CAP 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 GENERAL i.e., GENERAL and Sonida Senior go up and down completely randomly.

Pair Corralation between GENERAL and Sonida Senior

Assuming the 90 days trading horizon GENERAL ELEC CAP is expected to under-perform the Sonida Senior. But the bond apears to be less risky and, when comparing its historical volatility, GENERAL ELEC CAP is 2.28 times less risky than Sonida Senior. The bond trades about -0.04 of its potential returns per unit of risk. The Sonida Senior Living is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,768  in Sonida Senior Living on September 2, 2024 and sell it today you would lose (162.00) from holding Sonida Senior Living or give up 5.85% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy53.17%
ValuesDaily Returns

GENERAL ELEC CAP  vs.  Sonida Senior Living

 Performance 
       Timeline  
GENERAL ELEC CAP 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days GENERAL ELEC CAP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for GENERAL ELEC CAP investors.
Sonida Senior Living 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Sonida Senior Living has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Sonida Senior is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

GENERAL and Sonida Senior Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GENERAL and Sonida Senior

The main advantage of trading using opposite GENERAL and Sonida Senior positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GENERAL 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.
The idea behind GENERAL ELEC CAP and Sonida 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.
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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