Can any of the company-specific risk be diversified away by investing in both Sonida Senior and Predictive Oncology 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 Predictive Oncology 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 Predictive Oncology, you can compare the effects of market volatilities on Sonida Senior and Predictive Oncology 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 Predictive Oncology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonida Senior and Predictive Oncology.
Diversification Opportunities for Sonida Senior and Predictive Oncology
The 3 months correlation between Sonida and Predictive is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Sonida Senior Living and Predictive Oncology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Predictive Oncology 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 Predictive Oncology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Predictive Oncology has no effect on the direction of Sonida Senior i.e., Sonida Senior and Predictive Oncology go up and down completely randomly.
Pair Corralation between Sonida Senior and Predictive Oncology
Given the investment horizon of 90 days Sonida Senior Living is expected to generate 0.35 times more return on investment than Predictive Oncology. However, Sonida Senior Living is 2.84 times less risky than Predictive Oncology. It trades about -0.01 of its potential returns per unit of risk. Predictive Oncology is currently generating about -0.03 per unit of risk. If you would invest 2,905 in Sonida Senior Living on March 6, 2024 and sell it today you would lose (104.00) from holding Sonida Senior Living or give up 3.58% of portfolio value over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Sonida Senior Living are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, Sonida Senior sustained solid returns over the last few months and may actually be approaching a breakup point.
Over the last 90 days Predictive Oncology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in July 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.