Correlation Between Acadia Healthcare and Sienna Senior

Can any of the company-specific risk be diversified away by investing in both Acadia Healthcare and Sienna 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 Acadia Healthcare and Sienna Senior into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Acadia Healthcare and Sienna Senior Living, you can compare the effects of market volatilities on Acadia Healthcare and Sienna 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 Acadia Healthcare with a short position of Sienna Senior. Check out your portfolio center. Please also check ongoing floating volatility patterns of Acadia Healthcare and Sienna Senior.

Diversification Opportunities for Acadia Healthcare and Sienna Senior

0.55

Correlation Coefficient

Acadia Healthcare  Sienna Senior

Very weak diversification

The 3 months correlation between Acadia and Sienna is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Acadia Healthcare and Sienna Senior Living in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sienna Senior Living and Acadia Healthcare 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 Acadia Healthcare are associated (or correlated) with Sienna Senior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sienna Senior Living has no effect on the direction of Acadia Healthcare i.e., Acadia Healthcare and Sienna Senior go up and down completely randomly.

Pair Corralation between Acadia Healthcare and Sienna Senior

Given the investment horizon of 90 days Acadia Healthcare is expected to under-perform the Sienna Senior. In addition to that, Acadia Healthcare is 1.45 times more volatile than Sienna Senior Living. It trades about -0.07 of its total potential returns per unit of risk. Sienna Senior Living is currently generating about 0.11 per unit of volatility. If you would invest  733.00  in Sienna Senior Living on October 1, 2024 and sell it today you would earn a total of  371.00  from holding Sienna Senior Living or generate 50.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	81.66%
Values	Daily Returns

Acadia Healthcare  vs.  Sienna Senior Living

Acadia Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acadia Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Sienna Senior Living

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sienna Senior Living has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Acadia Healthcare and Sienna Senior

The main advantage of trading using opposite Acadia Healthcare and Sienna Senior positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Acadia Healthcare position performs unexpectedly, Sienna 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 Sienna Senior will offset losses from the drop in Sienna Senior's long position.

The idea behind Acadia Healthcare and Sienna 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.