Correlation Between Sonida Senior and HE Equipment

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

Diversification Opportunities for Sonida Senior and HE Equipment

0.38

Correlation Coefficient

Sonida Senior  HE Equipment

Weak diversification

The 3 months correlation between Sonida and HEES is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Sonida Senior Living and HE Equipment Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HE Equipment Services 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 HE Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HE Equipment Services has no effect on the direction of Sonida Senior i.e., Sonida Senior and HE Equipment go up and down completely randomly.

Pair Corralation between Sonida Senior and HE Equipment

Given the investment horizon of 90 days Sonida Senior Living is expected to generate 1.81 times more return on investment than HE Equipment. However, Sonida Senior is 1.81 times more volatile than HE Equipment Services. It trades about 0.04 of its potential returns per unit of risk. HE Equipment Services is currently generating about 0.01 per unit of risk. If you would invest  1,526  in Sonida Senior Living on October 12, 2024 and sell it today you would earn a total of  617.00  from holding Sonida Senior Living or generate 40.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Sonida Senior Living  vs.  HE Equipment Services

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.

HE Equipment Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HE Equipment Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Sonida Senior and HE Equipment

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

The idea behind Sonida Senior Living and HE Equipment Services 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.