Correlation Between SunLink Health and Quest Diagnostics

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

Diversification Opportunities for SunLink Health and Quest Diagnostics

-0.04

Correlation Coefficient

SunLink Health  Quest Diagnostics

Good diversification

The 12 months correlation between SunLink and Quest is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding SunLink Health Systems and Quest Diagnostics Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quest Diagnostics 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 Quest Diagnostics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quest Diagnostics has no effect on the direction of SunLink Health i.e., SunLink Health and Quest Diagnostics go up and down completely randomly.

Pair Corralation between SunLink Health and Quest Diagnostics

Considering the 90-day investment horizon SunLink Health Systems is expected to under-perform the Quest Diagnostics. In addition to that, SunLink Health is 1.97 times more volatile than Quest Diagnostics Incorporated. It trades about -0.1 of its total potential returns per unit of risk. Quest Diagnostics Incorporated is currently generating about 0.19 per unit of volatility. If you would invest  13,426  in Quest Diagnostics Incorporated on February 26, 2024 and sell it today you would earn a total of  702.00  from holding Quest Diagnostics Incorporated or generate 5.23% return on investment over 90 days.

Time Period	12 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

SunLink Health Systems  vs.  Quest Diagnostics Incorporated

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 latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Quest Diagnostics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Quest Diagnostics Incorporated are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Quest Diagnostics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SunLink Health and Quest Diagnostics

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

The idea behind SunLink Health Systems and Quest Diagnostics Incorporated 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.