Correlation Between SunLink Health and Big Tree

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

Diversification Opportunities for SunLink Health and Big Tree

0.04

Correlation Coefficient

SunLink Health  Big Tree

Significant diversification

The 3 months correlation between SunLink and Big is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding SunLink Health Systems and Big Tree Cloud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Tree Cloud 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 Big Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Tree Cloud has no effect on the direction of SunLink Health i.e., SunLink Health and Big Tree go up and down completely randomly.

Pair Corralation between SunLink Health and Big Tree

Considering the 90-day investment horizon SunLink Health is expected to generate 6.74 times less return on investment than Big Tree. But when comparing it to its historical volatility, SunLink Health Systems is 3.32 times less risky than Big Tree. It trades about 0.01 of its potential returns per unit of risk. Big Tree Cloud is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  509.00  in Big Tree Cloud on September 16, 2024 and sell it today you would lose (151.00) from holding Big Tree Cloud or give up 29.67% of portfolio value over 90 days.

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

SunLink Health Systems  vs.  Big Tree Cloud

SunLink Health Systems

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SunLink Health Systems are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Big Tree Cloud

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Big Tree Cloud are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Big Tree showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SunLink Health and Big Tree

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

The idea behind SunLink Health Systems and Big Tree Cloud 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.