Correlation Between SunLink Health and Heart Test

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

Diversification Opportunities for SunLink Health and Heart Test

0.22

Correlation Coefficient

SunLink Health  Heart Test

Modest diversification

The 3 months correlation between SunLink and Heart is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding SunLink Health Systems and Heart Test Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heart Test Laboratories 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 Heart Test. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heart Test Laboratories has no effect on the direction of SunLink Health i.e., SunLink Health and Heart Test go up and down completely randomly.

Pair Corralation between SunLink Health and Heart Test

Considering the 90-day investment horizon SunLink Health is expected to generate 13.84 times less return on investment than Heart Test. But when comparing it to its historical volatility, SunLink Health Systems is 3.5 times less risky than Heart Test. It trades about 0.04 of its potential returns per unit of risk. Heart Test Laboratories is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  3.01  in Heart Test Laboratories on December 29, 2024 and sell it today you would earn a total of  1.02  from holding Heart Test Laboratories or generate 33.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	32.79%
Values	Daily Returns

SunLink Health Systems  vs.  Heart Test Laboratories

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.

Heart Test Laboratories

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Heart Test Laboratories are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Heart Test showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SunLink Health and Heart Test

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

The idea behind SunLink Health Systems and Heart Test Laboratories 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.