Correlation Between Sonida Senior and Tenaris SA

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

Diversification Opportunities for Sonida Senior and Tenaris SA

-0.33

Correlation Coefficient

Sonida Senior  Tenaris SA

Very good diversification

The 3 months correlation between Sonida and Tenaris is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Sonida Senior Living and Tenaris SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tenaris SA ADR 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 Tenaris SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tenaris SA ADR has no effect on the direction of Sonida Senior i.e., Sonida Senior and Tenaris SA go up and down completely randomly.

Pair Corralation between Sonida Senior and Tenaris SA

Given the investment horizon of 90 days Sonida Senior Living is expected to generate 2.6 times more return on investment than Tenaris SA. However, Sonida Senior is 2.6 times more volatile than Tenaris SA ADR. It trades about 0.05 of its potential returns per unit of risk. Tenaris SA ADR is currently generating about 0.03 per unit of risk. If you would invest  1,319  in Sonida Senior Living on September 24, 2024 and sell it today you would earn a total of  1,051  from holding Sonida Senior Living or generate 79.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Sonida Senior Living  vs.  Tenaris SA ADR

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.

Tenaris SA ADR

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaris SA ADR are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Tenaris SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sonida Senior and Tenaris SA

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

The idea behind Sonida Senior Living and Tenaris SA ADR 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.