Correlation Between Sonida Senior and Stepan

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

Diversification Opportunities for Sonida Senior and Stepan

0.4

Correlation Coefficient

Sonida Senior  Stepan

Very weak diversification

The 3 months correlation between Sonida and Stepan is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Sonida Senior Living and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company 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 Stepan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepan Company has no effect on the direction of Sonida Senior i.e., Sonida Senior and Stepan go up and down completely randomly.

Pair Corralation between Sonida Senior and Stepan

Given the investment horizon of 90 days Sonida Senior Living is expected to generate 1.78 times more return on investment than Stepan. However, Sonida Senior is 1.78 times more volatile than Stepan Company. It trades about -0.03 of its potential returns per unit of risk. Stepan Company is currently generating about -0.08 per unit of risk. If you would invest  2,860  in Sonida Senior Living on September 29, 2024 and sell it today you would lose (569.00) from holding Sonida Senior Living or give up 19.9% 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.  Stepan Company

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 inconsistent 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.

Stepan Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stepan Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Sonida Senior and Stepan

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

The idea behind Sonida Senior Living and Stepan Company 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.