Correlation Between Brookdale Senior and Definitive Healthcare

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

Diversification Opportunities for Brookdale Senior and Definitive Healthcare

-0.06

Correlation Coefficient

Brookdale Senior  Definitive Healthcare

Good diversification

The 3 months correlation between Brookdale and Definitive is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Brookdale Senior Living and Definitive Healthcare Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Definitive Healthcare 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 Definitive Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Definitive Healthcare has no effect on the direction of Brookdale Senior i.e., Brookdale Senior and Definitive Healthcare go up and down completely randomly.

Pair Corralation between Brookdale Senior and Definitive Healthcare

Considering the 90-day investment horizon Brookdale Senior Living is expected to under-perform the Definitive Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Brookdale Senior Living is 1.15 times less risky than Definitive Healthcare. The stock trades about -0.21 of its potential returns per unit of risk. The Definitive Healthcare Corp is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  445.00  in Definitive Healthcare Corp on September 25, 2024 and sell it today you would lose (31.00) from holding Definitive Healthcare Corp or give up 6.97% 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.  Definitive Healthcare Corp

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 inconsistent 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.

Definitive Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Definitive Healthcare Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Definitive Healthcare is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Brookdale Senior and Definitive Healthcare

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

The idea behind Brookdale Senior Living and Definitive Healthcare Corp 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.