Correlation Between SunLink Health and Capital One

Can any of the company-specific risk be diversified away by investing in both SunLink Health and Capital One 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 Capital One 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 Capital One Financial, you can compare the effects of market volatilities on SunLink Health and Capital One 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 Capital One. Check out your portfolio center. Please also check ongoing floating volatility patterns of SunLink Health and Capital One.

Diversification Opportunities for SunLink Health and Capital One

0.05

Correlation Coefficient

SunLink Health  Capital One

Significant diversification

The 3 months correlation between SunLink and Capital is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding SunLink Health Systems and Capital One Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital One Financial 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 Capital One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital One Financial has no effect on the direction of SunLink Health i.e., SunLink Health and Capital One go up and down completely randomly.

Pair Corralation between SunLink Health and Capital One

Considering the 90-day investment horizon SunLink Health Systems is expected to generate 4.5 times more return on investment than Capital One. However, SunLink Health is 4.5 times more volatile than Capital One Financial. It trades about 0.01 of its potential returns per unit of risk. Capital One Financial is currently generating about -0.14 per unit of risk. If you would invest  79.00  in SunLink Health Systems on September 15, 2024 and sell it today you would lose (3.00) from holding SunLink Health Systems or give up 3.8% of portfolio value over 90 days.

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

SunLink Health Systems  vs.  Capital One Financial

SunLink Health Systems

Risk-Adjusted Performance

0 of 100

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 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.

Capital One Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital One Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Preferred Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with SunLink Health and Capital One

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

The idea behind SunLink Health Systems and Capital One Financial 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.