Correlation Between SunLink Health and Zhihu

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

Diversification Opportunities for SunLink Health and Zhihu

-0.08

Correlation Coefficient

SunLink Health  Zhihu

Good diversification

The 3 months correlation between SunLink and Zhihu is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding SunLink Health Systems and Zhihu Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhihu Inc ADR 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 Zhihu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhihu Inc ADR has no effect on the direction of SunLink Health i.e., SunLink Health and Zhihu go up and down completely randomly.

Pair Corralation between SunLink Health and Zhihu

Considering the 90-day investment horizon SunLink Health Systems is expected to under-perform the Zhihu. In addition to that, SunLink Health is 1.89 times more volatile than Zhihu Inc ADR. It trades about -0.02 of its total potential returns per unit of risk. Zhihu Inc ADR is currently generating about 0.11 per unit of volatility. If you would invest  351.00  in Zhihu Inc ADR on September 17, 2024 and sell it today you would earn a total of  19.00  from holding Zhihu Inc ADR or generate 5.41% return on investment over 90 days.

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

SunLink Health Systems  vs.  Zhihu Inc ADR

SunLink Health Systems

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SunLink Health Systems are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, SunLink Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Zhihu Inc ADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zhihu Inc ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Zhihu demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SunLink Health and Zhihu

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

The idea behind SunLink Health Systems and Zhihu Inc ADR 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 Stocks Directory module to find actively traded stocks across global markets.