Correlation Between SunLink Health and Entravision Communications

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

Diversification Opportunities for SunLink Health and Entravision Communications

-0.4

Correlation Coefficient

SunLink Health  Entravision Communications

Very good diversification

The 3 months correlation between SunLink and Entravision is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding SunLink Health Systems and Entravision Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entravision Communications 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 Entravision Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entravision Communications has no effect on the direction of SunLink Health i.e., SunLink Health and Entravision Communications go up and down completely randomly.

Pair Corralation between SunLink Health and Entravision Communications

Considering the 90-day investment horizon SunLink Health Systems is expected to under-perform the Entravision Communications. In addition to that, SunLink Health is 1.4 times more volatile than Entravision Communications. It trades about -0.02 of its total potential returns per unit of risk. Entravision Communications is currently generating about 0.15 per unit of volatility. If you would invest  188.00  in Entravision Communications on September 23, 2024 and sell it today you would earn a total of  58.00  from holding Entravision Communications or generate 30.85% return on investment over 90 days.

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

SunLink Health Systems  vs.  Entravision Communications

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.

Entravision Communications

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Entravision Communications are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Entravision Communications exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SunLink Health and Entravision Communications

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

The idea behind SunLink Health Systems and Entravision Communications 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.