Correlation Between Sonic Healthcare and Medical Developments
Can any of the company-specific risk be diversified away by investing in both Sonic Healthcare and Medical Developments 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 Medical Developments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sonic Healthcare and Medical Developments International, you can compare the effects of market volatilities on Sonic Healthcare and Medical Developments 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 Medical Developments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonic Healthcare and Medical Developments.
Diversification Opportunities for Sonic Healthcare and Medical Developments
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sonic and Medical is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Sonic Healthcare and Medical Developments Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Developments 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 Medical Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Developments has no effect on the direction of Sonic Healthcare i.e., Sonic Healthcare and Medical Developments go up and down completely randomly.
Pair Corralation between Sonic Healthcare and Medical Developments
Assuming the 90 days trading horizon Sonic Healthcare is expected to generate 0.76 times more return on investment than Medical Developments. However, Sonic Healthcare is 1.32 times less risky than Medical Developments. It trades about 0.07 of its potential returns per unit of risk. Medical Developments International is currently generating about -0.05 per unit of risk. If you would invest 2,722 in Sonic Healthcare on October 11, 2024 and sell it today you would earn a total of 102.00 from holding Sonic Healthcare or generate 3.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sonic Healthcare vs. Medical Developments Internati
Performance |
| Timeline |
| Sonic Healthcare |
| Medical Developments |
Sonic Healthcare and Medical Developments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sonic Healthcare and Medical Developments
The main advantage of trading using opposite Sonic Healthcare and Medical Developments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sonic Healthcare position performs unexpectedly, Medical Developments 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 Medical Developments will offset losses from the drop in Medical Developments' long position.| Sonic Healthcare vs. Aneka Tambang Tbk | Sonic Healthcare vs. BHP Group Limited | Sonic Healthcare vs. Rio Tinto | Sonic Healthcare vs. Macquarie Group Ltd |
| Medical Developments vs. Ainsworth Game Technology | Medical Developments vs. WiseTech Global Limited | Medical Developments vs. Dexus Convenience Retail | Medical Developments vs. RLF AgTech |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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