Correlation Between Technology One and Sonic Healthcare
Can any of the company-specific risk be diversified away by investing in both Technology One 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 Technology One and Sonic Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Technology One and Sonic Healthcare, you can compare the effects of market volatilities on Technology One 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 Technology One with a short position of Sonic Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Technology One and Sonic Healthcare.
Diversification Opportunities for Technology One and Sonic Healthcare
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Technology and Sonic is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Technology One and Sonic Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonic Healthcare and Technology One 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 Technology One 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 Technology One i.e., Technology One and Sonic Healthcare go up and down completely randomly.
Pair Corralation between Technology One and Sonic Healthcare
Assuming the 90 days trading horizon Technology One is expected to generate 1.31 times more return on investment than Sonic Healthcare. However, Technology One is 1.31 times more volatile than Sonic Healthcare. It trades about -0.02 of its potential returns per unit of risk. Sonic Healthcare is currently generating about -0.04 per unit of risk. If you would invest 3,051 in Technology One on October 12, 2024 and sell it today you would lose (16.00) from holding Technology One or give up 0.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Technology One vs. Sonic Healthcare
Performance |
| Timeline |
| Technology One |
| Sonic Healthcare |
Technology One and Sonic Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Technology One and Sonic Healthcare
The main advantage of trading using opposite Technology One and Sonic Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Technology One 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.| Technology One vs. Tombador Iron | Technology One vs. Pioneer Credit | Technology One vs. Iron Road | Technology One vs. Vulcan Steel |
| Sonic Healthcare vs. Readytech Holdings | Sonic Healthcare vs. Technology One | Sonic Healthcare vs. Dalaroo Metals | Sonic Healthcare vs. Stelar 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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