Correlation Between Sonida Senior and Wabash National

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

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

Diversification Opportunities for Sonida Senior and Wabash National

0.18

Correlation Coefficient

Sonida Senior  Wabash National

Average diversification

The 3 months correlation between Sonida and Wabash is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Sonida Senior Living and Wabash National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wabash National and Sonida 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 Sonida Senior Living are associated (or correlated) with Wabash National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wabash National has no effect on the direction of Sonida Senior i.e., Sonida Senior and Wabash National go up and down completely randomly.

Pair Corralation between Sonida Senior and Wabash National

Given the investment horizon of 90 days Sonida Senior Living is expected to under-perform the Wabash National. In addition to that, Sonida Senior is 1.29 times more volatile than Wabash National. It trades about -0.28 of its total potential returns per unit of risk. Wabash National is currently generating about 0.15 per unit of volatility. If you would invest  1,768  in Wabash National on August 21, 2024 and sell it today you would earn a total of  135.00  from holding Wabash National or generate 7.64% return on investment over 90 days.

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

Sonida Senior Living  vs.  Wabash National

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 inconsistent performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Wabash National

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wabash National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Wabash National is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Sonida Senior and Wabash National

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

The idea behind Sonida Senior Living and Wabash National 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.