Correlation Between Sotherly Hotels and SunLink Health

Can any of the company-specific risk be diversified away by investing in both Sotherly Hotels and SunLink Health 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 Sotherly Hotels and SunLink Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sotherly Hotels Series and SunLink Health Systems, you can compare the effects of market volatilities on Sotherly Hotels and SunLink Health 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 Sotherly Hotels with a short position of SunLink Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sotherly Hotels and SunLink Health.

Diversification Opportunities for Sotherly Hotels and SunLink Health

-0.07

Correlation Coefficient

Sotherly Hotels  SunLink Health

Good diversification

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

Pair Corralation between Sotherly Hotels and SunLink Health

Assuming the 90 days horizon Sotherly Hotels Series is expected to under-perform the SunLink Health. But the stock apears to be less risky and, when comparing its historical volatility, Sotherly Hotels Series is 2.56 times less risky than SunLink Health. The stock trades about 0.0 of its potential returns per unit of risk. The SunLink Health Systems is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  78.00  in SunLink Health Systems on May 5, 2025 and sell it today you would earn a total of  26.00  from holding SunLink Health Systems or generate 33.33% return on investment over 90 days.

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

Sotherly Hotels Series  vs.  SunLink Health Systems

Sotherly Hotels Series

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sotherly Hotels Series has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sotherly Hotels is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SunLink Health Systems

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SunLink Health Systems are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SunLink Health showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sotherly Hotels and SunLink Health

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

The idea behind Sotherly Hotels Series and SunLink Health Systems 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.