Correlation Between SunLink Health and Caf Serendipity

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

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

Diversification Opportunities for SunLink Health and Caf Serendipity

-0.21

Correlation Coefficient

SunLink Health  Caf Serendipity

Very good diversification

The 3 months correlation between SunLink and Caf is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding SunLink Health Systems and Caf Serendipity Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caf Serendipity Holdings and SunLink Health 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 SunLink Health Systems are associated (or correlated) with Caf Serendipity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caf Serendipity Holdings has no effect on the direction of SunLink Health i.e., SunLink Health and Caf Serendipity go up and down completely randomly.

Pair Corralation between SunLink Health and Caf Serendipity

Considering the 90-day investment horizon SunLink Health is expected to generate 3.96 times less return on investment than Caf Serendipity. But when comparing it to its historical volatility, SunLink Health Systems is 3.73 times less risky than Caf Serendipity. It trades about 0.01 of its potential returns per unit of risk. Caf Serendipity Holdings is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  0.10  in Caf Serendipity Holdings on September 14, 2024 and sell it today you would lose (0.08) from holding Caf Serendipity Holdings or give up 80.0% of portfolio value over 90 days.

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

SunLink Health Systems  vs.  Caf Serendipity Holdings

SunLink Health Systems

Risk-Adjusted Performance

0 of 100

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 fairly strong basic indicators, SunLink Health is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Caf Serendipity Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caf Serendipity Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively unsteady technical and fundamental indicators, Caf Serendipity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SunLink Health and Caf Serendipity

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

The idea behind SunLink Health Systems and Caf Serendipity Holdings 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.