Correlation Between SunLink Health and Smith Douglas

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

Diversification Opportunities for SunLink Health and Smith Douglas

-0.07

Correlation Coefficient

SunLink Health  Smith Douglas

Good diversification

The 3 months correlation between SunLink and Smith is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding SunLink Health Systems and Smith Douglas Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Douglas Homes 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 Smith Douglas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Douglas Homes has no effect on the direction of SunLink Health i.e., SunLink Health and Smith Douglas go up and down completely randomly.

Pair Corralation between SunLink Health and Smith Douglas

Considering the 90-day investment horizon SunLink Health is expected to generate 1.9 times less return on investment than Smith Douglas. In addition to that, SunLink Health is 1.63 times more volatile than Smith Douglas Homes. It trades about 0.03 of its total potential returns per unit of risk. Smith Douglas Homes is currently generating about 0.09 per unit of volatility. If you would invest  2,415  in Smith Douglas Homes on September 15, 2024 and sell it today you would earn a total of  822.00  from holding Smith Douglas Homes or generate 34.04% return on investment over 90 days.

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

SunLink Health Systems  vs.  Smith Douglas Homes

SunLink Health Systems

Risk-Adjusted Performance

0 of 100

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.

Smith Douglas Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smith Douglas Homes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with SunLink Health and Smith Douglas

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

The idea behind SunLink Health Systems and Smith Douglas Homes 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..