Correlation Between Sienna Senior and ModivCare

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

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

Diversification Opportunities for Sienna Senior and ModivCare

-0.14

Correlation Coefficient

Sienna Senior  ModivCare

Good diversification

The 3 months correlation between Sienna and ModivCare is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Sienna Senior Living and ModivCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ModivCare and Sienna 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 Sienna Senior Living are associated (or correlated) with ModivCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ModivCare has no effect on the direction of Sienna Senior i.e., Sienna Senior and ModivCare go up and down completely randomly.

Pair Corralation between Sienna Senior and ModivCare

Assuming the 90 days horizon Sienna Senior Living is expected to generate 0.2 times more return on investment than ModivCare. However, Sienna Senior Living is 4.9 times less risky than ModivCare. It trades about -0.31 of its potential returns per unit of risk. ModivCare is currently generating about -0.23 per unit of risk. If you would invest  1,200  in Sienna Senior Living on September 21, 2024 and sell it today you would lose (96.00) from holding Sienna Senior Living or give up 8.0% of portfolio value over 90 days.

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

Sienna Senior Living  vs.  ModivCare

Sienna Senior Living

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sienna Senior Living has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

ModivCare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ModivCare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, ModivCare is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Sienna Senior and ModivCare

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

The idea behind Sienna Senior Living and ModivCare 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.