Correlation Between Sonida Senior and Montauk Renewables

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

Diversification Opportunities for Sonida Senior and Montauk Renewables

0.24

Correlation Coefficient

Sonida Senior  Montauk Renewables

Modest diversification

The 3 months correlation between Sonida and Montauk is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Sonida Senior Living and Montauk Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Montauk Renewables 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 Montauk Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Montauk Renewables has no effect on the direction of Sonida Senior i.e., Sonida Senior and Montauk Renewables go up and down completely randomly.

Pair Corralation between Sonida Senior and Montauk Renewables

Given the investment horizon of 90 days Sonida Senior Living is expected to generate 0.77 times more return on investment than Montauk Renewables. However, Sonida Senior Living is 1.3 times less risky than Montauk Renewables. It trades about -0.01 of its potential returns per unit of risk. Montauk Renewables is currently generating about -0.04 per unit of risk. If you would invest  2,598  in Sonida Senior Living on September 17, 2024 and sell it today you would lose (115.00) from holding Sonida Senior Living or give up 4.43% of portfolio value over 90 days.

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

Sonida Senior Living  vs.  Montauk Renewables

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.

Montauk Renewables

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Sonida Senior and Montauk Renewables

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

The idea behind Sonida Senior Living and Montauk Renewables 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.