Correlation Between Enhabit and Sonida Senior

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

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

Diversification Opportunities for Enhabit and Sonida Senior

0.53

Correlation Coefficient

Enhabit  Sonida Senior

Very weak diversification

The 3 months correlation between Enhabit and Sonida is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Enhabit and Sonida Senior Living in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonida Senior Living and Enhabit 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 Enhabit are associated (or correlated) with Sonida Senior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonida Senior Living has no effect on the direction of Enhabit i.e., Enhabit and Sonida Senior go up and down completely randomly.

Pair Corralation between Enhabit and Sonida Senior

Given the investment horizon of 90 days Enhabit is expected to under-perform the Sonida Senior. But the stock apears to be less risky and, when comparing its historical volatility, Enhabit is 1.19 times less risky than Sonida Senior. The stock trades about -0.01 of its potential returns per unit of risk. The Sonida Senior Living is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,725  in Sonida Senior Living on September 2, 2024 and sell it today you would lose (119.00) from holding Sonida Senior Living or give up 4.37% of portfolio value over 90 days.

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

Enhabit  vs.  Sonida Senior Living

Enhabit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enhabit has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Enhabit is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sonida Senior Living

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sonida Senior Living has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Sonida Senior is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Enhabit and Sonida Senior

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

The idea behind Enhabit and Sonida 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.