Correlation Between Aldel Financial and Sonida Senior

Can any of the company-specific risk be diversified away by investing in both Aldel Financial and Sonida Senior 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 Aldel Financial and Sonida Senior into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aldel Financial II and Sonida Senior Living, you can compare the effects of market volatilities on Aldel Financial and Sonida Senior 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 Aldel Financial with a short position of Sonida Senior. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aldel Financial and Sonida Senior.

Diversification Opportunities for Aldel Financial and Sonida Senior

0.11

Correlation Coefficient

Aldel Financial  Sonida Senior

Average diversification

The 3 months correlation between Aldel and Sonida is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Aldel Financial II and Sonida Senior Living in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonida Senior Living and Aldel Financial 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 Aldel Financial II are associated (or correlated) with Sonida Senior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonida Senior Living has no effect on the direction of Aldel Financial i.e., Aldel Financial and Sonida Senior go up and down completely randomly.

Pair Corralation between Aldel Financial and Sonida Senior

Assuming the 90 days horizon Aldel Financial II is expected to generate 0.03 times more return on investment than Sonida Senior. However, Aldel Financial II is 29.49 times less risky than Sonida Senior. It trades about 0.05 of its potential returns per unit of risk. Sonida Senior Living is currently generating about -0.03 per unit of risk. If you would invest  999.00  in Aldel Financial II on September 13, 2024 and sell it today you would earn a total of  2.00  from holding Aldel Financial II or generate 0.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	57.14%
Values	Daily Returns

Aldel Financial II  vs.  Sonida Senior Living

Aldel Financial II

Risk-Adjusted Performance

4 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aldel Financial II are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Aldel Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aldel Financial and Sonida Senior

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

The idea behind Aldel Financial II and Sonida Senior Living 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.