Correlation Between Austco Healthcare and Sonic Healthcare

Can any of the company-specific risk be diversified away by investing in both Austco Healthcare 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 Austco Healthcare and Sonic Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Austco Healthcare and Sonic Healthcare, you can compare the effects of market volatilities on Austco Healthcare 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 Austco Healthcare with a short position of Sonic Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Austco Healthcare and Sonic Healthcare.

Diversification Opportunities for Austco Healthcare and Sonic Healthcare

0.67

Correlation Coefficient

Austco Healthcare  Sonic Healthcare

Poor diversification

The 3 months correlation between Austco and Sonic is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Austco Healthcare and Sonic Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonic Healthcare and Austco 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 Austco Healthcare 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 Austco Healthcare i.e., Austco Healthcare and Sonic Healthcare go up and down completely randomly.

Pair Corralation between Austco Healthcare and Sonic Healthcare

Assuming the 90 days trading horizon Austco Healthcare is expected to generate 3.34 times more return on investment than Sonic Healthcare. However, Austco Healthcare is 3.34 times more volatile than Sonic Healthcare. It trades about 0.06 of its potential returns per unit of risk. Sonic Healthcare is currently generating about -0.05 per unit of risk. If you would invest  27.00  in Austco Healthcare on December 30, 2024 and sell it today you would earn a total of  3.00  from holding Austco Healthcare or generate 11.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Austco Healthcare  vs.  Sonic Healthcare

Austco Healthcare

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Austco Healthcare are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Austco Healthcare unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sonic Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sonic Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Sonic Healthcare is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Austco Healthcare and Sonic Healthcare

The main advantage of trading using opposite Austco Healthcare and Sonic Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Austco Healthcare 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.

The idea behind Austco Healthcare and Sonic Healthcare pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Global Correlations module to find global opportunities by holding instruments from different markets.