Correlation Between Sonida Senior and Avient Corp

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

Diversification Opportunities for Sonida Senior and Avient Corp

-0.16

Correlation Coefficient

Sonida Senior  Avient Corp

Good diversification

The 3 months correlation between Sonida and Avient is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Sonida Senior Living and Avient Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avient Corp 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 Avient Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avient Corp has no effect on the direction of Sonida Senior i.e., Sonida Senior and Avient Corp go up and down completely randomly.

Pair Corralation between Sonida Senior and Avient Corp

Given the investment horizon of 90 days Sonida Senior Living is expected to under-perform the Avient Corp. In addition to that, Sonida Senior is 1.81 times more volatile than Avient Corp. It trades about -0.02 of its total potential returns per unit of risk. Avient Corp is currently generating about 0.08 per unit of volatility. If you would invest  4,571  in Avient Corp on September 12, 2024 and sell it today you would earn a total of  347.00  from holding Avient Corp or generate 7.59% 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.  Avient Corp

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.

Avient Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Avient Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Avient Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sonida Senior and Avient Corp

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

The idea behind Sonida Senior Living and Avient Corp 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.