Correlation Between Mednax and Brookdale Senior

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

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

Diversification Opportunities for Mednax and Brookdale Senior

-0.18

Correlation Coefficient

Mednax  Brookdale Senior

Good diversification

The 3 months correlation between Mednax and Brookdale is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Mednax Inc and Brookdale Senior Living in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookdale Senior Living and Mednax 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 Mednax Inc are associated (or correlated) with Brookdale Senior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookdale Senior Living has no effect on the direction of Mednax i.e., Mednax and Brookdale Senior go up and down completely randomly.

Pair Corralation between Mednax and Brookdale Senior

Allowing for the 90-day total investment horizon Mednax Inc is expected to under-perform the Brookdale Senior. In addition to that, Mednax is 1.4 times more volatile than Brookdale Senior Living. It trades about -0.47 of its total potential returns per unit of risk. Brookdale Senior Living is currently generating about -0.23 per unit of volatility. If you would invest  730.00  in Brookdale Senior Living on March 5, 2024 and sell it today you would lose (59.00) from holding Brookdale Senior Living or give up 8.08% of portfolio value over 90 days.

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

Mednax Inc  vs.  Brookdale Senior Living

Mednax Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mednax Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in July 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Brookdale Senior Living

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brookdale Senior Living are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating forward-looking signals, Brookdale Senior exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mednax and Brookdale Senior

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

The idea behind Mednax Inc and Brookdale 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.