Correlation Between Sonic Healthcare and Capitol Health
Can any of the company-specific risk be diversified away by investing in both Sonic Healthcare and Capitol 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 Sonic Healthcare and Capitol Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sonic Healthcare and Capitol Health, you can compare the effects of market volatilities on Sonic Healthcare and Capitol 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 Sonic Healthcare with a short position of Capitol Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonic Healthcare and Capitol Health.
Diversification Opportunities for Sonic Healthcare and Capitol Health
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Sonic and Capitol is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Sonic Healthcare and Capitol Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capitol Health and Sonic Healthcare 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 Sonic Healthcare are associated (or correlated) with Capitol Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capitol Health has no effect on the direction of Sonic Healthcare i.e., Sonic Healthcare and Capitol Health go up and down completely randomly.
Pair Corralation between Sonic Healthcare and Capitol Health
Assuming the 90 days trading horizon Sonic Healthcare is expected to generate 0.63 times more return on investment than Capitol Health. However, Sonic Healthcare is 1.58 times less risky than Capitol Health. It trades about 0.1 of its potential returns per unit of risk. Capitol Health is currently generating about -0.03 per unit of risk. If you would invest 2,722 in Sonic Healthcare on September 12, 2024 and sell it today you would earn a total of 106.00 from holding Sonic Healthcare or generate 3.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Sonic Healthcare vs. Capitol Health
Performance |
| Timeline |
| Sonic Healthcare |
| Capitol Health |
Sonic Healthcare and Capitol Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sonic Healthcare and Capitol Health
The main advantage of trading using opposite Sonic Healthcare and Capitol Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sonic Healthcare position performs unexpectedly, Capitol 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 Capitol Health will offset losses from the drop in Capitol Health's long position.| Sonic Healthcare vs. CSL | Sonic Healthcare vs. Tamawood | Sonic Healthcare vs. Cochlear | Sonic Healthcare vs. Rea Group |
| Capitol Health vs. CSL | Capitol Health vs. Tamawood | Capitol Health vs. Cochlear | Capitol Health vs. Rea Group |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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