Correlation Between Sonida Senior and WashTec AG

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

Diversification Opportunities for Sonida Senior and WashTec AG

-0.33

Correlation Coefficient

Sonida Senior  WashTec AG

Very good diversification

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

Pair Corralation between Sonida Senior and WashTec AG

Given the investment horizon of 90 days Sonida Senior Living is expected to generate 0.82 times more return on investment than WashTec AG. However, Sonida Senior Living is 1.22 times less risky than WashTec AG. It trades about 0.03 of its potential returns per unit of risk. WashTec AG is currently generating about -0.19 per unit of risk. If you would invest  2,274  in Sonida Senior Living on December 29, 2024 and sell it today you would earn a total of  48.00  from holding Sonida Senior Living or generate 2.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Sonida Senior Living  vs.  WashTec AG

Sonida Senior Living

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sonida Senior Living are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

WashTec AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days WashTec AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Sonida Senior and WashTec AG

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

The idea behind Sonida Senior Living and WashTec AG 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.