Correlation Between SunLink Health and Stepan

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

Diversification Opportunities for SunLink Health and Stepan

0.17

Correlation Coefficient

SunLink Health  Stepan

Average diversification

The 3 months correlation between SunLink and Stepan is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding SunLink Health Systems and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company 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 Stepan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepan Company has no effect on the direction of SunLink Health i.e., SunLink Health and Stepan go up and down completely randomly.

Pair Corralation between SunLink Health and Stepan

Considering the 90-day investment horizon SunLink Health Systems is expected to generate 2.11 times more return on investment than Stepan. However, SunLink Health is 2.11 times more volatile than Stepan Company. It trades about 0.12 of its potential returns per unit of risk. Stepan Company is currently generating about -0.04 per unit of risk. If you would invest  78.00  in SunLink Health Systems on May 4, 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 Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

SunLink Health Systems  vs.  Stepan Company

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.

Stepan Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stepan Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Stepan is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with SunLink Health and Stepan

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

The idea behind SunLink Health Systems and Stepan Company 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.