Correlation Between Sienna Senior and CareRx Corp

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

Diversification Opportunities for Sienna Senior and CareRx Corp

-0.22

Correlation Coefficient

Sienna Senior  CareRx Corp

Very good diversification

The 3 months correlation between Sienna and CareRx is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Sienna Senior Living and CareRx Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareRx Corp 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 CareRx Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareRx Corp has no effect on the direction of Sienna Senior i.e., Sienna Senior and CareRx Corp go up and down completely randomly.

Pair Corralation between Sienna Senior and CareRx Corp

Assuming the 90 days trading horizon Sienna Senior Living is expected to under-perform the CareRx Corp. But the stock apears to be less risky and, when comparing its historical volatility, Sienna Senior Living is 1.49 times less risky than CareRx Corp. The stock trades about -0.06 of its potential returns per unit of risk. The CareRx Corp is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  193.00  in CareRx Corp on December 4, 2024 and sell it today you would earn a total of  76.00  from holding CareRx Corp or generate 39.38% return on investment over 90 days.

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

Sienna Senior Living  vs.  CareRx Corp

Sienna Senior Living

Risk-Adjusted Performance

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.

CareRx Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CareRx Corp are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, CareRx Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sienna Senior and CareRx Corp

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

The idea behind Sienna Senior Living and CareRx Corp 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.

Check out your portfolio center.

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.