Correlation Between Guardant Health and Sonida Senior

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Can any of the company-specific risk be diversified away by investing in both Guardant Health 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 Guardant Health and Sonida Senior into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guardant Health and Sonida Senior Living, you can compare the effects of market volatilities on Guardant Health 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 Guardant Health with a short position of Sonida Senior. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guardant Health and Sonida Senior.

Diversification Opportunities for Guardant Health and Sonida Senior

-0.8
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Guardant and Sonida is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Guardant Health 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 Guardant Health 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 Guardant Health 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 Guardant Health i.e., Guardant Health and Sonida Senior go up and down completely randomly.

Pair Corralation between Guardant Health and Sonida Senior

Allowing for the 90-day total investment horizon Guardant Health is expected to under-perform the Sonida Senior. But the stock apears to be less risky and, when comparing its historical volatility, Guardant Health is 1.01 times less risky than Sonida Senior. The stock trades about -0.03 of its potential returns per unit of risk. The Sonida Senior Living is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,048  in Sonida Senior Living on January 17, 2024 and sell it today you would lose (160.00) from holding Sonida Senior Living or give up 5.25% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Guardant Health  vs.  Sonida Senior Living

 Performance 
       Timeline  
Guardant Health 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Guardant Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in May 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.
Sonida Senior Living 

Risk-Adjusted Performance

21 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Sonida Senior Living are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental indicators, Sonida Senior sustained solid returns over the last few months and may actually be approaching a breakup point.

Guardant Health and Sonida Senior Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Guardant Health and Sonida Senior

The main advantage of trading using opposite Guardant Health and Sonida Senior positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guardant Health 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 Guardant Health 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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