Correlation Between National Storage and Sonic Healthcare

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

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

Diversification Opportunities for National Storage and Sonic Healthcare

-0.39

Correlation Coefficient

National Storage  Sonic Healthcare

Very good diversification

The 3 months correlation between National and Sonic is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding National Storage REIT and Sonic Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonic Healthcare and National Storage 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 National Storage REIT 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 National Storage i.e., National Storage and Sonic Healthcare go up and down completely randomly.

Pair Corralation between National Storage and Sonic Healthcare

Assuming the 90 days trading horizon National Storage REIT is expected to under-perform the Sonic Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, National Storage REIT is 1.86 times less risky than Sonic Healthcare. The stock trades about -0.25 of its potential returns per unit of risk. The Sonic Healthcare is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,620  in Sonic Healthcare on September 17, 2024 and sell it today you would earn a total of  182.00  from holding Sonic Healthcare or generate 6.95% return on investment over 90 days.

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

National Storage REIT  vs.  Sonic Healthcare

National Storage REIT

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sonic Healthcare

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sonic Healthcare are ranked lower than 2 (%) 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 National Storage and Sonic Healthcare

The main advantage of trading using opposite National Storage and Sonic Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Storage 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 National Storage REIT 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.