Correlation Between Select Medical and Sonida Senior

Can any of the company-specific risk be diversified away by investing in both Select Medical and Sonida 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 Select Medical and Sonida Senior into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Select Medical Holdings and Sonida Senior Living, you can compare the effects of market volatilities on Select Medical and Sonida 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 Select Medical with a short position of Sonida Senior. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select Medical and Sonida Senior.

Diversification Opportunities for Select Medical and Sonida Senior

0.63

Correlation Coefficient

Select Medical  Sonida Senior

Poor diversification

The 3 months correlation between Select and Sonida is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Select Medical Holdings and Sonida Senior Living in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonida Senior Living and Select Medical 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 Select Medical Holdings are associated (or correlated) with Sonida Senior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonida Senior Living has no effect on the direction of Select Medical i.e., Select Medical and Sonida Senior go up and down completely randomly.

Pair Corralation between Select Medical and Sonida Senior

Considering the 90-day investment horizon Select Medical Holdings is expected to generate 0.44 times more return on investment than Sonida Senior. However, Select Medical Holdings is 2.26 times less risky than Sonida Senior. It trades about 0.03 of its potential returns per unit of risk. Sonida Senior Living is currently generating about -0.13 per unit of risk. If you would invest  3,257  in Select Medical Holdings on July 13, 2024 and sell it today you would earn a total of  57.00  from holding Select Medical Holdings or generate 1.75% return on investment over 90 days.

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

Select Medical Holdings  vs.  Sonida Senior Living

Select Medical Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Select Medical Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Sonida Senior Living

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sonida Senior Living has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in November 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Select Medical and Sonida Senior

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

The idea behind Select Medical Holdings and Sonida Senior Living 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.