Correlation Between Sonida Senior and PACIFIC

Can any of the company-specific risk be diversified away by investing in both Sonida Senior and PACIFIC 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 PACIFIC 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 PACIFIC BELL 7125, you can compare the effects of market volatilities on Sonida Senior and PACIFIC 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 PACIFIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonida Senior and PACIFIC.

Diversification Opportunities for Sonida Senior and PACIFIC

0.05

Correlation Coefficient

Sonida Senior  PACIFIC

Significant diversification

The 3 months correlation between Sonida and PACIFIC is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Sonida Senior Living and PACIFIC BELL 7125 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACIFIC BELL 7125 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 PACIFIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACIFIC BELL 7125 has no effect on the direction of Sonida Senior i.e., Sonida Senior and PACIFIC go up and down completely randomly.

Pair Corralation between Sonida Senior and PACIFIC

Given the investment horizon of 90 days Sonida Senior Living is expected to under-perform the PACIFIC. In addition to that, Sonida Senior is 3.35 times more volatile than PACIFIC BELL 7125. It trades about -0.03 of its total potential returns per unit of risk. PACIFIC BELL 7125 is currently generating about 0.0 per unit of volatility. If you would invest  10,232  in PACIFIC BELL 7125 on December 2, 2024 and sell it today you would lose (16.00) from holding PACIFIC BELL 7125 or give up 0.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	81.97%
Values	Daily Returns

Sonida Senior Living  vs.  PACIFIC BELL 7125

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.

PACIFIC BELL 7125

Risk-Adjusted Performance

Very Weak

Over the last 90 days PACIFIC BELL 7125 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PACIFIC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sonida Senior and PACIFIC

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

The idea behind Sonida Senior Living and PACIFIC BELL 7125 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.