Correlation Between Ralph Lauren and Sonida Senior

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

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

Diversification Opportunities for Ralph Lauren and Sonida Senior

-0.23

Correlation Coefficient

Ralph Lauren  Sonida Senior

Very good diversification

The 3 months correlation between Ralph and Sonida is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ralph Lauren Corp 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 Ralph Lauren 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 Ralph Lauren Corp 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 Ralph Lauren i.e., Ralph Lauren and Sonida Senior go up and down completely randomly.

Pair Corralation between Ralph Lauren and Sonida Senior

Allowing for the 90-day total investment horizon Ralph Lauren is expected to generate 1.61 times less return on investment than Sonida Senior. But when comparing it to its historical volatility, Ralph Lauren Corp is 1.6 times less risky than Sonida Senior. It trades about 0.29 of its potential returns per unit of risk. Sonida Senior Living is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  2,153  in Sonida Senior Living on September 17, 2024 and sell it today you would earn a total of  330.00  from holding Sonida Senior Living or generate 15.33% return on investment over 90 days.

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

Ralph Lauren Corp  vs.  Sonida Senior Living

Ralph Lauren Corp

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ralph Lauren Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent essential indicators, Ralph Lauren disclosed solid returns over the last few months and may actually be approaching a breakup point.

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ralph Lauren and Sonida Senior

The main advantage of trading using opposite Ralph Lauren and Sonida Senior positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ralph Lauren 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 Ralph Lauren Corp 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.