Correlation Between Brookdale Senior and American Shared

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

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

Diversification Opportunities for Brookdale Senior and American Shared

-0.38

Correlation Coefficient

Brookdale Senior  American Shared

Very good diversification

The 3 months correlation between Brookdale and American is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Brookdale Senior Living and American Shared Hospital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Shared Hospital and Brookdale 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 Brookdale Senior Living are associated (or correlated) with American Shared. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Shared Hospital has no effect on the direction of Brookdale Senior i.e., Brookdale Senior and American Shared go up and down completely randomly.

Pair Corralation between Brookdale Senior and American Shared

Considering the 90-day investment horizon Brookdale Senior Living is expected to under-perform the American Shared. But the stock apears to be less risky and, when comparing its historical volatility, Brookdale Senior Living is 1.28 times less risky than American Shared. The stock trades about -0.15 of its potential returns per unit of risk. The American Shared Hospital is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  329.00  in American Shared Hospital on September 21, 2024 and sell it today you would lose (10.00) from holding American Shared Hospital or give up 3.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Brookdale Senior Living  vs.  American Shared Hospital

Brookdale Senior Living

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brookdale Senior Living has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward-looking signals 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.

American Shared Hospital

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Shared Hospital are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating primary indicators, American Shared may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Brookdale Senior and American Shared

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

The idea behind Brookdale Senior Living and American Shared Hospital 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.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.