Correlation Between CSL and Sonic Healthcare

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

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

Diversification Opportunities for CSL and Sonic Healthcare

-0.28

Correlation Coefficient

CSL  Sonic Healthcare

Very good diversification

The 3 months correlation between CSL and Sonic is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding CSL and Sonic Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonic Healthcare and CSL 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 CSL 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 CSL i.e., CSL and Sonic Healthcare go up and down completely randomly.

Pair Corralation between CSL and Sonic Healthcare

Assuming the 90 days trading horizon CSL is expected to under-perform the Sonic Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, CSL is 1.36 times less risky than Sonic Healthcare. The stock trades about -0.1 of its potential returns per unit of risk. The Sonic Healthcare is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,695  in Sonic Healthcare on September 12, 2024 and sell it today you would earn a total of  149.00  from holding Sonic Healthcare or generate 5.53% return on investment over 90 days.

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

CSL  vs.  Sonic Healthcare

CSL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Sonic Healthcare

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sonic Healthcare are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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 CSL and Sonic Healthcare

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

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.