Correlation Between Brookdale Senior and NexGel Warrant

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

Diversification Opportunities for Brookdale Senior and NexGel Warrant

-0.35

Correlation Coefficient

Brookdale Senior  NexGel Warrant

Very good diversification

The 3 months correlation between Brookdale and NexGel is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Brookdale Senior Living and NexGel Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexGel Warrant 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 NexGel Warrant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NexGel Warrant has no effect on the direction of Brookdale Senior i.e., Brookdale Senior and NexGel Warrant go up and down completely randomly.

Pair Corralation between Brookdale Senior and NexGel Warrant

Considering the 90-day investment horizon Brookdale Senior is expected to generate 2.52 times less return on investment than NexGel Warrant. But when comparing it to its historical volatility, Brookdale Senior Living is 7.37 times less risky than NexGel Warrant. It trades about 0.13 of its potential returns per unit of risk. NexGel Warrant is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  40.00  in NexGel Warrant on May 7, 2025 and sell it today you would lose (6.00) from holding NexGel Warrant or give up 15.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	61.29%
Values	Daily Returns

Brookdale Senior Living  vs.  NexGel Warrant

Brookdale Senior Living

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Brookdale Senior Living are ranked lower than 10 (%) 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.

NexGel Warrant

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in NexGel Warrant are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting essential indicators, NexGel Warrant showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brookdale Senior and NexGel Warrant

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

The idea behind Brookdale Senior Living and NexGel Warrant 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.