Correlation Between American Shared and Brookdale Senior
Can any of the company-specific risk be diversified away by investing in both American Shared 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 American Shared and Brookdale Senior into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Shared Hospital and Brookdale Senior Living, you can compare the effects of market volatilities on American Shared 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 American Shared with a short position of Brookdale Senior. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Shared and Brookdale Senior.
Diversification Opportunities for American Shared and Brookdale Senior
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Brookdale is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding American Shared Hospital 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 American Shared 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 American Shared Hospital 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 American Shared i.e., American Shared and Brookdale Senior go up and down completely randomly.
Pair Corralation between American Shared and Brookdale Senior
Considering the 90-day investment horizon American Shared Hospital is expected to generate 1.06 times more return on investment than Brookdale Senior. However, American Shared is 1.06 times more volatile than Brookdale Senior Living. It trades about 0.29 of its potential returns per unit of risk. Brookdale Senior Living is currently generating about 0.1 per unit of risk. If you would invest 259.00 in American Shared Hospital on January 26, 2024 and sell it today you would earn a total of 43.00 from holding American Shared Hospital or generate 16.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Shared Hospital vs. Brookdale Senior Living
Performance |
| Timeline |
| American Shared Hospital |
| Brookdale Senior Living |
American Shared and Brookdale Senior Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Shared and Brookdale Senior
The main advantage of trading using opposite American Shared and Brookdale Senior positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Shared 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.| American Shared vs. Ramsay Health Care | American Shared vs. Medical Facilities | American Shared vs. Jack Nathan Medical | American Shared vs. Fresenius SE Co |
| Brookdale Senior vs. The Ensign Group | Brookdale Senior vs. Community Health Systems | Brookdale Senior vs. National HealthCare | Brookdale Senior vs. Mednax Inc |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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