Correlation Between Sonida Senior and Pentair PLC

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

Diversification Opportunities for Sonida Senior and Pentair PLC

-0.55

Correlation Coefficient

Sonida Senior  Pentair PLC

Excellent diversification

The 3 months correlation between Sonida and Pentair is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Sonida Senior Living and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC 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 Pentair PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentair PLC has no effect on the direction of Sonida Senior i.e., Sonida Senior and Pentair PLC go up and down completely randomly.

Pair Corralation between Sonida Senior and Pentair PLC

Given the investment horizon of 90 days Sonida Senior Living is expected to under-perform the Pentair PLC. In addition to that, Sonida Senior is 2.93 times more volatile than Pentair PLC. It trades about -0.02 of its total potential returns per unit of risk. Pentair PLC is currently generating about 0.32 per unit of volatility. If you would invest  8,848  in Pentair PLC on August 30, 2024 and sell it today you would earn a total of  2,048  from holding Pentair PLC or generate 23.15% return on investment over 90 days.

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

Sonida Senior Living  vs.  Pentair PLC

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

Pentair PLC

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Pentair PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sonida Senior and Pentair PLC

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

The idea behind Sonida Senior Living and Pentair PLC 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.