Correlation Between GMS and SunLink Health

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

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

Diversification Opportunities for GMS and SunLink Health

-0.4

Correlation Coefficient

GMS  SunLink Health

Very good diversification

The 3 months correlation between GMS and SunLink is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc 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 GMS 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 GMS Inc 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 GMS i.e., GMS and SunLink Health go up and down completely randomly.

Pair Corralation between GMS and SunLink Health

Considering the 90-day investment horizon GMS Inc is expected to under-perform the SunLink Health. But the stock apears to be less risky and, when comparing its historical volatility, GMS Inc is 3.44 times less risky than SunLink Health. The stock trades about -0.09 of its potential returns per unit of risk. The SunLink Health Systems is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  123.00  in SunLink Health Systems on December 27, 2024 and sell it today you would lose (21.00) from holding SunLink Health Systems or give up 17.07% of portfolio value over 90 days.

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

GMS Inc  vs.  SunLink Health Systems

GMS Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days GMS Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

SunLink Health Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days SunLink Health Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with GMS and SunLink Health

The main advantage of trading using opposite GMS and SunLink Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS 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 GMS Inc 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.