Correlation Between SunLink Health and DHC Acquisition

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

Diversification Opportunities for SunLink Health and DHC Acquisition

0.14

Correlation Coefficient

SunLink Health  DHC Acquisition

Average diversification

The 3 months correlation between SunLink and DHC is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding SunLink Health Systems and DHC Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DHC Acquisition Corp 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 DHC Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DHC Acquisition Corp has no effect on the direction of SunLink Health i.e., SunLink Health and DHC Acquisition go up and down completely randomly.

Pair Corralation between SunLink Health and DHC Acquisition

Considering the 90-day investment horizon SunLink Health Systems is expected to generate 7.68 times more return on investment than DHC Acquisition. However, SunLink Health is 7.68 times more volatile than DHC Acquisition Corp. It trades about 0.03 of its potential returns per unit of risk. DHC Acquisition Corp is currently generating about 0.02 per unit of risk. If you would invest  64.00  in SunLink Health Systems on September 14, 2024 and sell it today you would earn a total of  12.00  from holding SunLink Health Systems or generate 18.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	28.89%
Values	Daily Returns

SunLink Health Systems  vs.  DHC Acquisition Corp

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.

DHC Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DHC Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, DHC Acquisition is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SunLink Health and DHC Acquisition

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

The idea behind SunLink Health Systems and DHC Acquisition Corp 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.