Correlation Between Medical Facilities and Sienna Senior

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

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

Diversification Opportunities for Medical Facilities and Sienna Senior

-0.11

Correlation Coefficient

Medical Facilities  Sienna Senior

Good diversification

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

Pair Corralation between Medical Facilities and Sienna Senior

Assuming the 90 days horizon Medical Facilities is expected to generate 1.55 times more return on investment than Sienna Senior. However, Medical Facilities is 1.55 times more volatile than Sienna Senior Living. It trades about 0.12 of its potential returns per unit of risk. Sienna Senior Living is currently generating about -0.1 per unit of risk. If you would invest  1,393  in Medical Facilities on September 21, 2024 and sell it today you would earn a total of  174.00  from holding Medical Facilities or generate 12.49% return on investment over 90 days.

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

Medical Facilities  vs.  Sienna Senior Living

Medical Facilities

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Facilities are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Medical Facilities displayed solid returns over the last few months and may actually be approaching a breakup point.

Sienna Senior Living

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sienna Senior Living has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Medical Facilities and Sienna Senior

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

The idea behind Medical Facilities and Sienna 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..