Correlation Between Chartwell Retirement and Sienna Senior

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

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

Diversification Opportunities for Chartwell Retirement and Sienna Senior

0.75

Correlation Coefficient

Chartwell Retirement  Sienna Senior

Poor diversification

The 3 months correlation between Chartwell and Sienna is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Chartwell Retirement Residence 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 Chartwell Retirement 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 Chartwell Retirement Residences 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 Chartwell Retirement i.e., Chartwell Retirement and Sienna Senior go up and down completely randomly.

Pair Corralation between Chartwell Retirement and Sienna Senior

Assuming the 90 days trading horizon Chartwell Retirement Residences is expected to generate 1.08 times more return on investment than Sienna Senior. However, Chartwell Retirement is 1.08 times more volatile than Sienna Senior Living. It trades about 0.17 of its potential returns per unit of risk. Sienna Senior Living is currently generating about 0.13 per unit of risk. If you would invest  1,448  in Chartwell Retirement Residences on August 31, 2024 and sell it today you would earn a total of  178.00  from holding Chartwell Retirement Residences or generate 12.29% return on investment over 90 days.

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

Chartwell Retirement Residence  vs.  Sienna Senior Living

Chartwell Retirement

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chartwell Retirement Residences are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical indicators, Chartwell Retirement may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Sienna Senior Living

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sienna Senior Living are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Sienna Senior may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Chartwell Retirement and Sienna Senior

The main advantage of trading using opposite Chartwell Retirement and Sienna Senior positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chartwell Retirement 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 Chartwell Retirement Residences 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.