Correlation Between Brookdale Senior and Enhabit

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

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

Diversification Opportunities for Brookdale Senior and Enhabit

0.41

Correlation Coefficient

Brookdale Senior  Enhabit

Very weak diversification

The 3 months correlation between Brookdale and Enhabit is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Brookdale Senior Living and Enhabit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enhabit and Brookdale 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 Brookdale Senior Living are associated (or correlated) with Enhabit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enhabit has no effect on the direction of Brookdale Senior i.e., Brookdale Senior and Enhabit go up and down completely randomly.

Pair Corralation between Brookdale Senior and Enhabit

Given the investment horizon of 90 days Brookdale Senior Living is expected to under-perform the Enhabit. In addition to that, Brookdale Senior is 1.02 times more volatile than Enhabit. It trades about -0.13 of its total potential returns per unit of risk. Enhabit is currently generating about -0.01 per unit of volatility. If you would invest  808.00  in Enhabit on September 3, 2024 and sell it today you would lose (35.00) from holding Enhabit or give up 4.33% of portfolio value over 90 days.

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

Brookdale Senior Living  vs.  Enhabit

Brookdale Senior Living

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brookdale Senior Living has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Enhabit

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Brookdale Senior and Enhabit

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

The idea behind Brookdale Senior Living and Enhabit 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.