Correlation Between ICON PLC and Sonic Healthcare

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

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

Diversification Opportunities for ICON PLC and Sonic Healthcare

0.16

Correlation Coefficient

ICON PLC  Sonic Healthcare

Average diversification

The 3 months correlation between ICON and Sonic is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding ICON PLC and Sonic Healthcare Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonic Healthcare and ICON PLC 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 ICON PLC 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 ICON PLC i.e., ICON PLC and Sonic Healthcare go up and down completely randomly.

Pair Corralation between ICON PLC and Sonic Healthcare

Given the investment horizon of 90 days ICON PLC is expected to under-perform the Sonic Healthcare. In addition to that, ICON PLC is 1.85 times more volatile than Sonic Healthcare Ltd. It trades about -0.13 of its total potential returns per unit of risk. Sonic Healthcare Ltd is currently generating about 0.14 per unit of volatility. If you would invest  1,719  in Sonic Healthcare Ltd on October 27, 2024 and sell it today you would earn a total of  56.00  from holding Sonic Healthcare Ltd or generate 3.26% return on investment over 90 days.

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

ICON PLC  vs.  Sonic Healthcare Ltd

ICON PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ICON PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's essential indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Sonic Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sonic Healthcare Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Sonic Healthcare is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ICON PLC and Sonic Healthcare

The main advantage of trading using opposite ICON PLC and Sonic Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ICON PLC 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 ICON PLC and Sonic Healthcare Ltd 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.