Correlation Between SunLink Health and China Jo

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

Diversification Opportunities for SunLink Health and China Jo

0.82

Correlation Coefficient

SunLink Health  China Jo

Very poor diversification

The 3 months correlation between SunLink and China is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding SunLink Health Systems and China Jo Jo Drugstores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Jo Jo 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 China Jo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Jo Jo has no effect on the direction of SunLink Health i.e., SunLink Health and China Jo go up and down completely randomly.

Pair Corralation between SunLink Health and China Jo

Considering the 90-day investment horizon SunLink Health Systems is expected to under-perform the China Jo. But the stock apears to be less risky and, when comparing its historical volatility, SunLink Health Systems is 1.83 times less risky than China Jo. The stock trades about -0.15 of its potential returns per unit of risk. The China Jo Jo Drugstores is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  291.00  in China Jo Jo Drugstores on February 17, 2024 and sell it today you would lose (6.00) from holding China Jo Jo Drugstores or give up 2.06% of portfolio value over 90 days.

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

SunLink Health Systems  vs.  China Jo Jo Drugstores

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

China Jo Jo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Jo Jo Drugstores has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward-looking indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with SunLink Health and China Jo

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

The idea behind SunLink Health Systems and China Jo Jo Drugstores 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.