Correlation Between SunLink Health and PepsiCo

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

Diversification Opportunities for SunLink Health and PepsiCo

0.13

Correlation Coefficient

SunLink Health  PepsiCo

Average diversification

The 3 months correlation between SunLink and PepsiCo is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding SunLink Health Systems and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo 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 PepsiCo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PepsiCo has no effect on the direction of SunLink Health i.e., SunLink Health and PepsiCo go up and down completely randomly.

Pair Corralation between SunLink Health and PepsiCo

Considering the 90-day investment horizon SunLink Health Systems is expected to generate 3.83 times more return on investment than PepsiCo. However, SunLink Health is 3.83 times more volatile than PepsiCo. It trades about 0.04 of its potential returns per unit of risk. PepsiCo is currently generating about 0.0 per unit of risk. If you would invest  102.00  in SunLink Health Systems on December 29, 2024 and sell it today you would earn a total of  4.00  from holding SunLink Health Systems or generate 3.92% return on investment over 90 days.

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

SunLink Health Systems  vs.  PepsiCo

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.

PepsiCo

Risk-Adjusted Performance

Very Weak

Over the last 90 days PepsiCo has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, PepsiCo is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with SunLink Health and PepsiCo

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

The idea behind SunLink Health Systems and PepsiCo 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.