Correlation Between Iron Road and Sonic Healthcare
Can any of the company-specific risk be diversified away by investing in both Iron Road 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 Iron Road and Sonic Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iron Road and Sonic Healthcare, you can compare the effects of market volatilities on Iron Road 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 Iron Road with a short position of Sonic Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iron Road and Sonic Healthcare.
Diversification Opportunities for Iron Road and Sonic Healthcare
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Iron and Sonic is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Iron Road and Sonic Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonic Healthcare and Iron Road 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 Iron Road 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 Iron Road i.e., Iron Road and Sonic Healthcare go up and down completely randomly.
Pair Corralation between Iron Road and Sonic Healthcare
Assuming the 90 days trading horizon Iron Road is expected to generate 2.64 times more return on investment than Sonic Healthcare. However, Iron Road is 2.64 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 -0.02 per unit of risk. If you would invest 7.00 in Iron Road on September 20, 2024 and sell it today you would lose (1.40) from holding Iron Road or give up 20.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Iron Road vs. Sonic Healthcare
Performance |
| Timeline |
| Iron Road |
| Sonic Healthcare |
Iron Road and Sonic Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iron Road and Sonic Healthcare
The main advantage of trading using opposite Iron Road and Sonic Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iron Road 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.| Iron Road vs. Northern Star Resources | Iron Road vs. Bluescope Steel | Iron Road vs. Sandfire Resources NL | Iron Road vs. De Grey Mining |
| Sonic Healthcare vs. The Environmental Group | Sonic Healthcare vs. Australian Unity Office | Sonic Healthcare vs. Iron Road | Sonic Healthcare vs. Phoslock Environmental Technologies |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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