Correlation Between Brookdale Senior and Lifestance Health

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

Diversification Opportunities for Brookdale Senior and Lifestance Health

-0.74

Correlation Coefficient

Brookdale Senior  Lifestance Health

Pay attention - limited upside

The 3 months correlation between Brookdale and Lifestance is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Brookdale Senior Living and Lifestance Health Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifestance Health 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 Lifestance Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifestance Health has no effect on the direction of Brookdale Senior i.e., Brookdale Senior and Lifestance Health go up and down completely randomly.

Pair Corralation between Brookdale Senior and Lifestance Health

Considering the 90-day investment horizon Brookdale Senior Living is expected to under-perform the Lifestance Health. In addition to that, Brookdale Senior is 1.04 times more volatile than Lifestance Health Group. It trades about -0.15 of its total potential returns per unit of risk. Lifestance Health Group is currently generating about 0.16 per unit of volatility. If you would invest  558.00  in Lifestance Health Group on July 26, 2024 and sell it today you would earn a total of  141.00  from holding Lifestance Health Group or generate 25.27% return on investment over 90 days.

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

Brookdale Senior Living  vs.  Lifestance Health Group

Brookdale Senior Living

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brookdale Senior Living has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward-looking signals remain rather sound which may send shares a bit higher in November 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Lifestance Health

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lifestance Health Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Lifestance Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brookdale Senior and Lifestance Health

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

The idea behind Brookdale Senior Living and Lifestance Health Group 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.