Correlation Between Analog Devices and SunLink Health

Can any of the company-specific risk be diversified away by investing in both Analog Devices and SunLink Health 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 Analog Devices and SunLink Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Analog Devices and SunLink Health Systems, you can compare the effects of market volatilities on Analog Devices and SunLink Health 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 Analog Devices with a short position of SunLink Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Analog Devices and SunLink Health.

Diversification Opportunities for Analog Devices and SunLink Health

0.29

Correlation Coefficient

Analog Devices  SunLink Health

Modest diversification

The 3 months correlation between Analog and SunLink is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and SunLink Health Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SunLink Health Systems and Analog Devices 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 Analog Devices are associated (or correlated) with SunLink Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SunLink Health Systems has no effect on the direction of Analog Devices i.e., Analog Devices and SunLink Health go up and down completely randomly.

Pair Corralation between Analog Devices and SunLink Health

Considering the 90-day investment horizon Analog Devices is expected to under-perform the SunLink Health. But the stock apears to be less risky and, when comparing its historical volatility, Analog Devices is 2.52 times less risky than SunLink Health. The stock trades about -0.01 of its potential returns per unit of risk. The SunLink Health Systems is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  76.00  in SunLink Health Systems on September 11, 2024 and sell it today you would earn a total of  1.00  from holding SunLink Health Systems or generate 1.32% return on investment over 90 days.

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

Analog Devices  vs.  SunLink Health Systems

Analog Devices

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

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.

Pair Trading with Analog Devices and SunLink Health

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

The idea behind Analog Devices and SunLink Health Systems 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.