Correlation Between Brookdale Senior and Becton Dickinson

Can any of the company-specific risk be diversified away by investing in both Brookdale Senior and Becton Dickinson 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 Becton Dickinson 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 Becton Dickinson and, you can compare the effects of market volatilities on Brookdale Senior and Becton Dickinson 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 Becton Dickinson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookdale Senior and Becton Dickinson.

Diversification Opportunities for Brookdale Senior and Becton Dickinson

-0.49

Correlation Coefficient

Brookdale Senior  Becton Dickinson

Very good diversification

The 3 months correlation between Brookdale and Becton is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Brookdale Senior Living and Becton Dickinson and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Becton Dickinson 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 Becton Dickinson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Becton Dickinson has no effect on the direction of Brookdale Senior i.e., Brookdale Senior and Becton Dickinson go up and down completely randomly.

Pair Corralation between Brookdale Senior and Becton Dickinson

Considering the 90-day investment horizon Brookdale Senior Living is expected to generate 2.06 times more return on investment than Becton Dickinson. However, Brookdale Senior is 2.06 times more volatile than Becton Dickinson and. It trades about 0.01 of its potential returns per unit of risk. Becton Dickinson and is currently generating about -0.19 per unit of risk. If you would invest  580.00  in Brookdale Senior Living on January 12, 2025 and sell it today you would lose (5.00) from holding Brookdale Senior Living or give up 0.86% of portfolio value over 90 days.

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

Brookdale Senior Living  vs.  Becton Dickinson and

Brookdale Senior Living

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brookdale Senior Living are ranked lower than 7 (%) 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.

Becton Dickinson

Risk-Adjusted Performance

Very Weak

Over the last 90 days Becton Dickinson and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Brookdale Senior and Becton Dickinson

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

The idea behind Brookdale Senior Living and Becton Dickinson and 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.