Correlation Between Sienna Senior and Chemtrade Logistics

Can any of the company-specific risk be diversified away by investing in both Sienna Senior and Chemtrade Logistics 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 Chemtrade Logistics 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 Chemtrade Logistics Income, you can compare the effects of market volatilities on Sienna Senior and Chemtrade Logistics 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 Chemtrade Logistics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sienna Senior and Chemtrade Logistics.

Diversification Opportunities for Sienna Senior and Chemtrade Logistics

0.04

Correlation Coefficient

Sienna Senior  Chemtrade Logistics

Significant diversification

The 3 months correlation between Sienna and Chemtrade is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Sienna Senior Living and Chemtrade Logistics Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemtrade Logistics 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 Chemtrade Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemtrade Logistics has no effect on the direction of Sienna Senior i.e., Sienna Senior and Chemtrade Logistics go up and down completely randomly.

Pair Corralation between Sienna Senior and Chemtrade Logistics

Assuming the 90 days trading horizon Sienna Senior Living is expected to under-perform the Chemtrade Logistics. But the stock apears to be less risky and, when comparing its historical volatility, Sienna Senior Living is 1.19 times less risky than Chemtrade Logistics. The stock trades about -0.02 of its potential returns per unit of risk. The Chemtrade Logistics Income is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,005  in Chemtrade Logistics Income on September 12, 2024 and sell it today you would earn a total of  132.00  from holding Chemtrade Logistics Income or generate 13.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Sienna Senior Living  vs.  Chemtrade Logistics Income

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. In spite of very healthy basic indicators, Sienna Senior is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Chemtrade Logistics

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chemtrade Logistics Income are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, Chemtrade Logistics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sienna Senior and Chemtrade Logistics

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

The idea behind Sienna Senior Living and Chemtrade Logistics Income 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.