Correlation Between Brookdale Senior and Aveanna Healthcare

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

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

Diversification Opportunities for Brookdale Senior and Aveanna Healthcare

0.22

Correlation Coefficient

Brookdale Senior  Aveanna Healthcare

Modest diversification

The 3 months correlation between Brookdale and Aveanna is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Brookdale Senior Living and Aveanna Healthcare Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aveanna Healthcare and Brookdale 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 Brookdale Senior Living are associated (or correlated) with Aveanna Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aveanna Healthcare has no effect on the direction of Brookdale Senior i.e., Brookdale Senior and Aveanna Healthcare go up and down completely randomly.

Pair Corralation between Brookdale Senior and Aveanna Healthcare

Considering the 90-day investment horizon Brookdale Senior is expected to generate 5.75 times less return on investment than Aveanna Healthcare. But when comparing it to its historical volatility, Brookdale Senior Living is 1.16 times less risky than Aveanna Healthcare. It trades about 0.09 of its potential returns per unit of risk. Aveanna Healthcare Holdings is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  227.00  in Aveanna Healthcare Holdings on February 21, 2024 and sell it today you would earn a total of  64.00  from holding Aveanna Healthcare Holdings or generate 28.19% return on investment over 90 days.

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

Brookdale Senior Living  vs.  Aveanna Healthcare Holdings

Brookdale Senior Living

Risk-Adjusted Performance

11 of 100

Modest

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 fragile forward-looking signals, Brookdale Senior exhibited solid returns over the last few months and may actually be approaching a breakup point.

Aveanna Healthcare

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aveanna Healthcare Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Aveanna Healthcare demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brookdale Senior and Aveanna Healthcare

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

The idea behind Brookdale Senior Living and Aveanna Healthcare Holdings 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.