Correlation Between Sienna Senior and CVS HEALTH

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

Diversification Opportunities for Sienna Senior and CVS HEALTH

-0.28

Correlation Coefficient

Sienna Senior  CVS HEALTH

Very good diversification

The 3 months correlation between Sienna and CVS is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Sienna Senior Living and CVS HEALTH CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS HEALTH CDR 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 CVS HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS HEALTH CDR has no effect on the direction of Sienna Senior i.e., Sienna Senior and CVS HEALTH go up and down completely randomly.

Pair Corralation between Sienna Senior and CVS HEALTH

Assuming the 90 days trading horizon Sienna Senior Living is expected to generate 0.64 times more return on investment than CVS HEALTH. However, Sienna Senior Living is 1.57 times less risky than CVS HEALTH. It trades about 0.1 of its potential returns per unit of risk. CVS HEALTH CDR is currently generating about -0.05 per unit of risk. If you would invest  935.00  in Sienna Senior Living on September 13, 2024 and sell it today you would earn a total of  707.00  from holding Sienna Senior Living or generate 75.61% 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.  CVS HEALTH CDR

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.

CVS HEALTH CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS HEALTH CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Sienna Senior and CVS HEALTH

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

The idea behind Sienna Senior Living and CVS HEALTH CDR 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.