Correlation Between Sonida Senior and Sphere Entertainment

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

Diversification Opportunities for Sonida Senior and Sphere Entertainment

0.19

Correlation Coefficient

Sonida Senior  Sphere Entertainment

Average diversification

The 3 months correlation between Sonida and Sphere is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Sonida Senior Living and Sphere Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sphere Entertainment 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 Sphere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sphere Entertainment has no effect on the direction of Sonida Senior i.e., Sonida Senior and Sphere Entertainment go up and down completely randomly.

Pair Corralation between Sonida Senior and Sphere Entertainment

Given the investment horizon of 90 days Sonida Senior Living is expected to under-perform the Sphere Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Sonida Senior Living is 1.03 times less risky than Sphere Entertainment. The stock trades about -0.03 of its potential returns per unit of risk. The Sphere Entertainment Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,105  in Sphere Entertainment Co on December 1, 2024 and sell it today you would earn a total of  258.00  from holding Sphere Entertainment Co or generate 6.29% return on investment over 90 days.

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

Sonida Senior Living  vs.  Sphere Entertainment Co

Sonida Senior Living

Risk-Adjusted Performance

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.

Sphere Entertainment

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sphere Entertainment Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical indicators, Sphere Entertainment may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sonida Senior and Sphere Entertainment

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

The idea behind Sonida Senior Living and Sphere Entertainment Co 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.