Correlation Between Sonida Senior and Community Health

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

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

Diversification Opportunities for Sonida Senior and Community Health

0.49

Correlation Coefficient

Sonida Senior  Community Health

Very weak diversification

The 3 months correlation between Sonida and Community is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Sonida Senior Living and Community Health Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Health Systems and Sonida 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 Sonida Senior Living are associated (or correlated) with Community Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Health Systems has no effect on the direction of Sonida Senior i.e., Sonida Senior and Community Health go up and down completely randomly.

Pair Corralation between Sonida Senior and Community Health

Given the investment horizon of 90 days Sonida Senior Living is expected to generate 0.61 times more return on investment than Community Health. However, Sonida Senior Living is 1.64 times less risky than Community Health. It trades about 0.0 of its potential returns per unit of risk. Community Health Systems is currently generating about -0.03 per unit of risk. If you would invest  2,319  in Sonida Senior Living on December 26, 2024 and sell it today you would lose (23.00) from holding Sonida Senior Living or give up 0.99% of portfolio value over 90 days.

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

Sonida Senior Living  vs.  Community Health Systems

Sonida Senior Living

Risk-Adjusted Performance

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

Community Health Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Community Health Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Community Health is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Sonida Senior and Community Health

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

The idea behind Sonida Senior Living and Community Health Systems 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.