Correlation Between National Vision and SunLink Health

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

By analyzing existing cross correlation between National Vision Holdings and SunLink Health Systems, you can compare the effects of market volatilities on National Vision and SunLink 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 National Vision with a short position of SunLink Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Vision and SunLink Health.

Diversification Opportunities for National Vision and SunLink Health

0.31

Correlation Coefficient

National Vision  SunLink Health

Weak diversification

The 3 months correlation between National and SunLink is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding National Vision Holdings and SunLink Health Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SunLink Health Systems and National Vision 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 National Vision Holdings are associated (or correlated) with SunLink Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SunLink Health Systems has no effect on the direction of National Vision i.e., National Vision and SunLink Health go up and down completely randomly.

Pair Corralation between National Vision and SunLink Health

Considering the 90-day investment horizon National Vision Holdings is expected to generate 0.5 times more return on investment than SunLink Health. However, National Vision Holdings is 1.99 times less risky than SunLink Health. It trades about 0.17 of its potential returns per unit of risk. SunLink Health Systems is currently generating about 0.04 per unit of risk. If you would invest  1,010  in National Vision Holdings on December 29, 2024 and sell it today you would earn a total of  316.00  from holding National Vision Holdings or generate 31.29% return on investment over 90 days.

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

National Vision Holdings  vs.  SunLink Health Systems

National Vision Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in National Vision Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, National Vision exhibited solid returns over the last few months and may actually be approaching a breakup point.

SunLink Health Systems

Risk-Adjusted Performance

Insignificant

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

Pair Trading with National Vision and SunLink Health

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

The idea behind National Vision Holdings and SunLink Health Systems 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.