Correlation Between Sonida Senior and SunLink Health

Can any of the company-specific risk be diversified away by investing in both Sonida Senior 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 Sonida Senior and SunLink Health 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 SunLink Health Systems, you can compare the effects of market volatilities on Sonida Senior 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 Sonida Senior with a short position of SunLink Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonida Senior and SunLink Health.

Diversification Opportunities for Sonida Senior and SunLink Health

0.03

Correlation Coefficient

Sonida Senior  SunLink Health

Significant diversification

The 3 months correlation between Sonida and SunLink is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Sonida Senior Living 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 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 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 Sonida Senior i.e., Sonida Senior and SunLink Health go up and down completely randomly.

Pair Corralation between Sonida Senior and SunLink Health

Given the investment horizon of 90 days Sonida Senior Living is expected to generate 0.37 times more return on investment than SunLink Health. However, Sonida Senior Living is 2.71 times less risky than SunLink Health. It trades about 0.01 of its potential returns per unit of risk. SunLink Health Systems is currently generating about -0.03 per unit of risk. If you would invest  2,319  in Sonida Senior Living on December 25, 2024 and sell it today you would earn a total of  1.00  from holding Sonida Senior Living or generate 0.04% 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.  SunLink Health Systems

Sonida Senior Living

Risk-Adjusted Performance

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 somewhat strong fundamental indicators, Sonida Senior is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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 Sonida Senior and SunLink Health

The main advantage of trading using opposite Sonida Senior and SunLink Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sonida Senior 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 Sonida Senior Living 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.