Correlation Between Sonida Senior and Network CN

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

Diversification Opportunities for Sonida Senior and Network CN

0.44

Correlation Coefficient

Sonida Senior  Network CN

Very weak diversification

The 3 months correlation between Sonida and Network is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Sonida Senior Living and Network CN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Network CN 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 Network CN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Network CN has no effect on the direction of Sonida Senior i.e., Sonida Senior and Network CN go up and down completely randomly.

Pair Corralation between Sonida Senior and Network CN

Given the investment horizon of 90 days Sonida Senior is expected to generate 37.46 times less return on investment than Network CN. But when comparing it to its historical volatility, Sonida Senior Living is 14.49 times less risky than Network CN. It trades about 0.04 of its potential returns per unit of risk. Network CN is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  70.00  in Network CN on October 11, 2024 and sell it today you would lose (65.75) from holding Network CN or give up 93.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.4%
Values	Daily Returns

Sonida Senior Living  vs.  Network CN

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

Network CN

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Network CN are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Network CN displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sonida Senior and Network CN

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

The idea behind Sonida Senior Living and Network CN 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.