Correlation Between Sonida Senior and AMERICAN

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

Diversification Opportunities for Sonida Senior and AMERICAN

0.31

Correlation Coefficient

Sonida Senior  AMERICAN

Weak diversification

The 3 months correlation between Sonida and AMERICAN is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Sonida Senior Living and AMERICAN TOWER P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERICAN TOWER P 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 AMERICAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMERICAN TOWER P has no effect on the direction of Sonida Senior i.e., Sonida Senior and AMERICAN go up and down completely randomly.

Pair Corralation between Sonida Senior and AMERICAN

Given the investment horizon of 90 days Sonida Senior Living is expected to under-perform the AMERICAN. In addition to that, Sonida Senior is 8.21 times more volatile than AMERICAN TOWER P. It trades about -0.06 of its total potential returns per unit of risk. AMERICAN TOWER P is currently generating about -0.15 per unit of volatility. If you would invest  9,975  in AMERICAN TOWER P on October 26, 2024 and sell it today you would lose (284.00) from holding AMERICAN TOWER P or give up 2.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Sonida Senior Living  vs.  AMERICAN TOWER P

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 weak 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.

AMERICAN TOWER P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AMERICAN TOWER P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AMERICAN is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sonida Senior and AMERICAN

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

The idea behind Sonida Senior Living and AMERICAN TOWER P 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.