Correlation Between Sonida Senior and HUMANA

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

Diversification Opportunities for Sonida Senior and HUMANA

0.67

Correlation Coefficient

Sonida Senior  HUMANA

Poor diversification

The 3 months correlation between Sonida and HUMANA is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Sonida Senior Living and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC 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 HUMANA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUMANA INC has no effect on the direction of Sonida Senior i.e., Sonida Senior and HUMANA go up and down completely randomly.

Pair Corralation between Sonida Senior and HUMANA

Given the investment horizon of 90 days Sonida Senior Living is expected to generate 2.77 times more return on investment than HUMANA. However, Sonida Senior is 2.77 times more volatile than HUMANA INC. It trades about -0.02 of its potential returns per unit of risk. HUMANA INC is currently generating about -0.08 per unit of risk. If you would invest  2,492  in Sonida Senior Living on December 4, 2024 and sell it today you would lose (105.00) from holding Sonida Senior Living or give up 4.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Sonida Senior Living  vs.  HUMANA INC

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.

HUMANA INC

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Sonida Senior and HUMANA

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

The idea behind Sonida Senior Living and HUMANA INC 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.