Correlation Between Macquarie and Sonic Healthcare

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

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

Diversification Opportunities for Macquarie and Sonic Healthcare

0.93

Correlation Coefficient

Macquarie  Sonic Healthcare

Almost no diversification

The 3 months correlation between Macquarie and Sonic is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Group and Sonic Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonic Healthcare and Macquarie 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 Macquarie Group 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 Macquarie i.e., Macquarie and Sonic Healthcare go up and down completely randomly.

Pair Corralation between Macquarie and Sonic Healthcare

Assuming the 90 days trading horizon Macquarie Group is expected to under-perform the Sonic Healthcare. In addition to that, Macquarie is 1.38 times more volatile than Sonic Healthcare. It trades about -0.09 of its total potential returns per unit of risk. Sonic Healthcare is currently generating about -0.05 per unit of volatility. If you would invest  2,680  in Sonic Healthcare on December 30, 2024 and sell it today you would lose (102.00) from holding Sonic Healthcare or give up 3.81% of portfolio value over 90 days.

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

Macquarie Group  vs.  Sonic Healthcare

Macquarie Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Macquarie Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental 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

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 Macquarie and Sonic Healthcare

The main advantage of trading using opposite Macquarie and Sonic Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macquarie 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 Macquarie Group 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.