Correlation Between Brookdale Senior and ATI Physical

Can any of the company-specific risk be diversified away by investing in both Brookdale Senior and ATI Physical 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 ATI Physical 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 ATI Physical Therapy, you can compare the effects of market volatilities on Brookdale Senior and ATI Physical 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 ATI Physical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookdale Senior and ATI Physical.

Diversification Opportunities for Brookdale Senior and ATI Physical

0.68

Correlation Coefficient

Brookdale Senior  ATI Physical

Poor diversification

The 3 months correlation between Brookdale and ATI is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Brookdale Senior Living and ATI Physical Therapy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATI Physical Therapy 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 ATI Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATI Physical Therapy has no effect on the direction of Brookdale Senior i.e., Brookdale Senior and ATI Physical go up and down completely randomly.

Pair Corralation between Brookdale Senior and ATI Physical

Considering the 90-day investment horizon Brookdale Senior Living is expected to generate 0.18 times more return on investment than ATI Physical. However, Brookdale Senior Living is 5.7 times less risky than ATI Physical. It trades about -0.14 of its potential returns per unit of risk. ATI Physical Therapy is currently generating about -0.39 per unit of risk. If you would invest  612.00  in Brookdale Senior Living on October 25, 2024 and sell it today you would lose (124.00) from holding Brookdale Senior Living or give up 20.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	49.15%
Values	Daily Returns

Brookdale Senior Living  vs.  ATI Physical Therapy

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 February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

ATI Physical Therapy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ATI Physical Therapy has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's forward indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Brookdale Senior and ATI Physical

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

The idea behind Brookdale Senior Living and ATI Physical Therapy 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.