Correlation Between Sonida Senior and Invesco SP

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

Diversification Opportunities for Sonida Senior and Invesco SP

-0.3

Correlation Coefficient

Sonida Senior  Invesco SP

Very good diversification

The 3 months correlation between Sonida and Invesco is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Sonida Senior Living and Invesco SP MidCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP MidCap 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 Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP MidCap has no effect on the direction of Sonida Senior i.e., Sonida Senior and Invesco SP go up and down completely randomly.

Pair Corralation between Sonida Senior and Invesco SP

Given the investment horizon of 90 days Sonida Senior Living is expected to generate 3.05 times more return on investment than Invesco SP. However, Sonida Senior is 3.05 times more volatile than Invesco SP MidCap. It trades about 0.06 of its potential returns per unit of risk. Invesco SP MidCap is currently generating about -0.04 per unit of risk. If you would invest  2,476  in Sonida Senior Living on September 12, 2024 and sell it today you would earn a total of  66.00  from holding Sonida Senior Living or generate 2.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Sonida Senior Living  vs.  Invesco SP MidCap

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 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.

Invesco SP MidCap

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP MidCap are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Invesco SP displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sonida Senior and Invesco SP

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

The idea behind Sonida Senior Living and Invesco SP MidCap 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.