Correlation Between SunLink Health and Boston Properties

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

Diversification Opportunities for SunLink Health and Boston Properties

0.37

Correlation Coefficient

SunLink Health  Boston Properties

Weak diversification

The 3 months correlation between SunLink and Boston is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding SunLink Health Systems and Boston Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston 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 Boston Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Properties has no effect on the direction of SunLink Health i.e., SunLink Health and Boston Properties go up and down completely randomly.

Pair Corralation between SunLink Health and Boston Properties

Considering the 90-day investment horizon SunLink Health Systems is expected to under-perform the Boston Properties. In addition to that, SunLink Health is 3.83 times more volatile than Boston Properties. It trades about -0.01 of its total potential returns per unit of risk. Boston Properties is currently generating about 0.03 per unit of volatility. If you would invest  7,947  in Boston Properties on September 15, 2024 and sell it today you would earn a total of  46.00  from holding Boston Properties or generate 0.58% return on investment over 90 days.

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

SunLink Health Systems  vs.  Boston Properties

SunLink Health Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SunLink Health Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, SunLink Health is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Boston Properties

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SunLink Health and Boston Properties

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

The idea behind SunLink Health Systems and Boston 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.