Correlation Between BHP Group and Sonic Healthcare
Can any of the company-specific risk be diversified away by investing in both BHP Group and Sonic Healthcare 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 BHP Group and Sonic Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BHP Group Limited and Sonic Healthcare, you can compare the effects of market volatilities on BHP Group and Sonic Healthcare 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 BHP Group with a short position of Sonic Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Sonic Healthcare.
Diversification Opportunities for BHP Group and Sonic Healthcare
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BHP and Sonic is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Sonic Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonic Healthcare and BHP Group 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 BHP Group Limited are associated (or correlated) with Sonic Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonic Healthcare has no effect on the direction of BHP Group i.e., BHP Group and Sonic Healthcare go up and down completely randomly.
Pair Corralation between BHP Group and Sonic Healthcare
Assuming the 90 days trading horizon BHP Group Limited is expected to generate 1.41 times more return on investment than Sonic Healthcare. However, BHP Group is 1.41 times more volatile than Sonic Healthcare. It trades about -0.01 of its potential returns per unit of risk. Sonic Healthcare is currently generating about -0.24 per unit of risk. If you would invest 3,986 in BHP Group Limited on September 27, 2024 and sell it today you would lose (13.00) from holding BHP Group Limited or give up 0.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHP Group Limited vs. Sonic Healthcare
Performance |
| Timeline |
| BHP Group Limited |
| Sonic Healthcare |
BHP Group and Sonic Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Sonic Healthcare
The main advantage of trading using opposite BHP Group and Sonic Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Sonic Healthcare 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 Sonic Healthcare will offset losses from the drop in Sonic Healthcare's long position.| BHP Group vs. Northern Star Resources | BHP Group vs. Evolution Mining | BHP Group vs. Bluescope Steel | BHP Group vs. Aneka Tambang Tbk |
| Sonic Healthcare vs. Aneka Tambang Tbk | Sonic Healthcare vs. BHP Group Limited | Sonic Healthcare vs. Commonwealth Bank | Sonic Healthcare vs. Commonwealth Bank of |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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