Correlation Between Sonida Senior and Nine Energy

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

Diversification Opportunities for Sonida Senior and Nine Energy

-0.11

Correlation Coefficient

Sonida Senior  Nine Energy

Good diversification

The 3 months correlation between Sonida and Nine is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Sonida Senior Living and Nine Energy Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nine Energy Service 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 Nine Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nine Energy Service has no effect on the direction of Sonida Senior i.e., Sonida Senior and Nine Energy go up and down completely randomly.

Pair Corralation between Sonida Senior and Nine Energy

Given the investment horizon of 90 days Sonida Senior is expected to generate 132.99 times less return on investment than Nine Energy. But when comparing it to its historical volatility, Sonida Senior Living is 2.87 times less risky than Nine Energy. It trades about 0.01 of its potential returns per unit of risk. Nine Energy Service is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  102.00  in Nine Energy Service on September 5, 2024 and sell it today you would earn a total of  67.00  from holding Nine Energy Service or generate 65.69% return on investment over 90 days.

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

Sonida Senior Living  vs.  Nine Energy Service

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 latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Nine Energy Service

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nine Energy Service are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Nine Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sonida Senior and Nine Energy

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

The idea behind Sonida Senior Living and Nine Energy Service 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.