Correlation Between Lifestance Health and Brookdale Senior

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

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

Diversification Opportunities for Lifestance Health and Brookdale Senior

-0.69

Correlation Coefficient

Lifestance Health  Brookdale Senior

Excellent diversification

The 3 months correlation between Lifestance and Brookdale is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Lifestance Health Group and Brookdale Senior Living in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookdale Senior Living and Lifestance Health 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 Lifestance Health Group are associated (or correlated) with Brookdale Senior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookdale Senior Living has no effect on the direction of Lifestance Health i.e., Lifestance Health and Brookdale Senior go up and down completely randomly.

Pair Corralation between Lifestance Health and Brookdale Senior

Given the investment horizon of 90 days Lifestance Health Group is expected to generate 0.74 times more return on investment than Brookdale Senior. However, Lifestance Health Group is 1.36 times less risky than Brookdale Senior. It trades about 0.12 of its potential returns per unit of risk. Brookdale Senior Living is currently generating about -0.12 per unit of risk. If you would invest  649.00  in Lifestance Health Group on August 31, 2024 and sell it today you would earn a total of  102.00  from holding Lifestance Health Group or generate 15.72% return on investment over 90 days.

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

Lifestance Health Group  vs.  Brookdale Senior Living

Lifestance Health

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lifestance Health Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Lifestance Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 unsteady performance in the last few months, the Stock's forward-looking signals remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Lifestance Health and Brookdale Senior

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

The idea behind Lifestance Health Group and Brookdale 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.