Correlation Between SunLink Health and Establishment Labs

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

Diversification Opportunities for SunLink Health and Establishment Labs

-0.87

Correlation Coefficient

SunLink Health  Establishment Labs

Pay attention - limited upside

The 3 months correlation between SunLink and Establishment is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding SunLink Health Systems and Establishment Labs Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Establishment Labs 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 Establishment Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Establishment Labs has no effect on the direction of SunLink Health i.e., SunLink Health and Establishment Labs go up and down completely randomly.

Pair Corralation between SunLink Health and Establishment Labs

Considering the 90-day investment horizon SunLink Health Systems is expected to generate 0.93 times more return on investment than Establishment Labs. However, SunLink Health Systems is 1.07 times less risky than Establishment Labs. It trades about -0.01 of its potential returns per unit of risk. Establishment Labs Holdings is currently generating about -0.01 per unit of risk. If you would invest  86.00  in SunLink Health Systems on January 29, 2024 and sell it today you would lose (22.00) from holding SunLink Health Systems or give up 25.58% of portfolio value over 90 days.

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

SunLink Health Systems  vs.  Establishment Labs Holdings

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 conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Establishment Labs

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Establishment Labs Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Establishment Labs sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SunLink Health and Establishment Labs

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

The idea behind SunLink Health Systems and Establishment Labs Holdings 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.