Correlation Between Sonic Healthcare and National Australia
Can any of the company-specific risk be diversified away by investing in both Sonic Healthcare and National Australia 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 National Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sonic Healthcare and National Australia Bank, you can compare the effects of market volatilities on Sonic Healthcare and National Australia 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 National Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonic Healthcare and National Australia.
Diversification Opportunities for Sonic Healthcare and National Australia
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Sonic and National is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Sonic Healthcare and National Australia Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Australia Bank 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 National Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Australia Bank has no effect on the direction of Sonic Healthcare i.e., Sonic Healthcare and National Australia go up and down completely randomly.
Pair Corralation between Sonic Healthcare and National Australia
Assuming the 90 days trading horizon Sonic Healthcare is expected to generate 1.87 times more return on investment than National Australia. However, Sonic Healthcare is 1.87 times more volatile than National Australia Bank. It trades about 0.16 of its potential returns per unit of risk. National Australia Bank is currently generating about 0.14 per unit of risk. If you would invest 2,693 in Sonic Healthcare on September 1, 2024 and sell it today you would earn a total of 164.00 from holding Sonic Healthcare or generate 6.09% 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. National Australia Bank
Performance |
| Timeline |
| Sonic Healthcare |
| National Australia Bank |
Sonic Healthcare and National Australia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sonic Healthcare and National Australia
The main advantage of trading using opposite Sonic Healthcare and National Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sonic Healthcare position performs unexpectedly, National Australia 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 National Australia will offset losses from the drop in National Australia's long position.| Sonic Healthcare vs. Aneka Tambang Tbk | Sonic Healthcare vs. ANZ Group Holdings | Sonic Healthcare vs. Australia and New | Sonic Healthcare vs. ANZ Group Holdings |
| National Australia vs. 29Metals | National Australia vs. Thorney Technologies | National Australia vs. Macquarie Technology Group | National Australia vs. Sky Metals |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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