Correlation Between National HealthCare and Sonida Senior

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

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

Diversification Opportunities for National HealthCare and Sonida Senior

0.12

Correlation Coefficient

National HealthCare  Sonida Senior

Average diversification

The 3 months correlation between National and Sonida is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding National HealthCare 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 National HealthCare 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 National HealthCare 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 National HealthCare i.e., National HealthCare and Sonida Senior go up and down completely randomly.

Pair Corralation between National HealthCare and Sonida Senior

Considering the 90-day investment horizon National HealthCare is expected to generate 0.64 times more return on investment than Sonida Senior. However, National HealthCare is 1.57 times less risky than Sonida Senior. It trades about -0.07 of its potential returns per unit of risk. Sonida Senior Living is currently generating about -0.05 per unit of risk. If you would invest  12,638  in National HealthCare on September 21, 2024 and sell it today you would lose (1,255) from holding National HealthCare or give up 9.93% of portfolio value over 90 days.

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

National HealthCare  vs.  Sonida Senior Living

National HealthCare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National HealthCare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 latest conflicting performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with National HealthCare and Sonida Senior

The main advantage of trading using opposite National HealthCare and Sonida Senior positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National HealthCare 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 National HealthCare 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.