Correlation Between Analog Devices and SunLink Health

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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

0.3
  Correlation Coefficient

Weak diversification

The 3 months correlation between Analog and SunLink is 0.3. 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 generate 5.14 times less return on investment than SunLink Health. But when comparing it to its historical volatility, Analog Devices is 2.5 times less risky than SunLink Health. It trades about 0.03 of its potential returns per unit of risk. SunLink Health Systems is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  76.00  in SunLink Health Systems on September 6, 2024 and sell it today you would earn a total of  8.00  from holding SunLink Health Systems or generate 10.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Analog Devices  vs.  SunLink Health Systems

 Performance 
       Timeline  
Analog Devices 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Analog Devices are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in SunLink Health Systems are ranked lower than 4 (%) 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.

Analog Devices and SunLink Health Volatility Contrast

   Predicted Return Density   
       Returns  

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.
Check out your portfolio center.
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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