Correlation Between Illumina and Sonic Healthcare

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

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

Diversification Opportunities for Illumina and Sonic Healthcare

0.22

Correlation Coefficient

Illumina  Sonic Healthcare

Modest diversification

The 3 months correlation between Illumina and Sonic is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Illumina and Sonic Healthcare Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonic Healthcare and Illumina 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 Illumina 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 Illumina i.e., Illumina and Sonic Healthcare go up and down completely randomly.

Pair Corralation between Illumina and Sonic Healthcare

Given the investment horizon of 90 days Illumina is expected to under-perform the Sonic Healthcare. In addition to that, Illumina is 1.47 times more volatile than Sonic Healthcare Ltd. It trades about -0.29 of its total potential returns per unit of risk. Sonic Healthcare Ltd is currently generating about -0.03 per unit of volatility. If you would invest  1,703  in Sonic Healthcare Ltd on December 20, 2024 and sell it today you would lose (64.00) from holding Sonic Healthcare Ltd or give up 3.76% of portfolio value over 90 days.

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

Illumina  vs.  Sonic Healthcare Ltd

Illumina

Risk-Adjusted Performance

Very Weak

Over the last 90 days Illumina has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Sonic Healthcare

Risk-Adjusted Performance

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 Illumina and Sonic Healthcare

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

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.