Correlation Between SunLink Health and Summit Hotel

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

Diversification Opportunities for SunLink Health and Summit Hotel

0.0

Correlation Coefficient

SunLink Health  Summit Hotel

Pay attention - limited upside

The 3 months correlation between SunLink and Summit is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding SunLink Health Systems and Summit Hotel Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Hotel Properties 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 Summit Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Hotel Properties has no effect on the direction of SunLink Health i.e., SunLink Health and Summit Hotel go up and down completely randomly.

Pair Corralation between SunLink Health and Summit Hotel

Considering the 90-day investment horizon SunLink Health Systems is expected to generate 9.88 times more return on investment than Summit Hotel. However, SunLink Health is 9.88 times more volatile than Summit Hotel Properties. It trades about 0.16 of its potential returns per unit of risk. Summit Hotel Properties is currently generating about -0.1 per unit of risk. If you would invest  77.00  in SunLink Health Systems on October 10, 2024 and sell it today you would earn a total of  28.00  from holding SunLink Health Systems or generate 36.36% return on investment over 90 days.

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

SunLink Health Systems  vs.  Summit Hotel Properties

SunLink Health Systems

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SunLink Health Systems are ranked lower than 6 (%) 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.

Summit Hotel Properties

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Hotel Properties are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Summit Hotel is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SunLink Health and Summit Hotel

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

The idea behind SunLink Health Systems and Summit Hotel Properties 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.