Correlation Between Sotera Health and Sonic Healthcare
Can any of the company-specific risk be diversified away by investing in both Sotera Health 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 Sotera Health and Sonic Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sotera Health Co and Sonic Healthcare Ltd, you can compare the effects of market volatilities on Sotera Health 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 Sotera Health with a short position of Sonic Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sotera Health and Sonic Healthcare.
Diversification Opportunities for Sotera Health and Sonic Healthcare
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Sotera and Sonic is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Sotera Health Co and Sonic Healthcare Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonic Healthcare and Sotera 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 Sotera Health Co 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 Sotera Health i.e., Sotera Health and Sonic Healthcare go up and down completely randomly.
Pair Corralation between Sotera Health and Sonic Healthcare
Considering the 90-day investment horizon Sotera Health is expected to generate 1.37 times less return on investment than Sonic Healthcare. In addition to that, Sotera Health is 1.34 times more volatile than Sonic Healthcare Ltd. It trades about 0.04 of its total potential returns per unit of risk. Sonic Healthcare Ltd is currently generating about 0.08 per unit of volatility. If you would invest 1,577 in Sonic Healthcare Ltd on September 3, 2024 and sell it today you would earn a total of 268.00 from holding Sonic Healthcare Ltd or generate 16.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sotera Health Co vs. Sonic Healthcare Ltd
Performance |
| Timeline |
| Sotera Health |
| Sonic Healthcare |
Sotera Health and Sonic Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sotera Health and Sonic Healthcare
The main advantage of trading using opposite Sotera Health and Sonic Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sotera Health 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.| Sotera Health vs. Qiagen NV | Sotera Health vs. Aclaris Therapeutics | Sotera Health vs. Neogen | Sotera Health vs. RadNet Inc |
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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