Correlation Between Sonic Healthcare and Danaher

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

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

Diversification Opportunities for Sonic Healthcare and Danaher

-0.03

Correlation Coefficient

Sonic Healthcare  Danaher

Good diversification

The 3 months correlation between Sonic and Danaher is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Sonic Healthcare Ltd and Danaher in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danaher and Sonic Healthcare 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 Sonic Healthcare Ltd are associated (or correlated) with Danaher. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danaher has no effect on the direction of Sonic Healthcare i.e., Sonic Healthcare and Danaher go up and down completely randomly.

Pair Corralation between Sonic Healthcare and Danaher

Assuming the 90 days horizon Sonic Healthcare Ltd is expected to generate 0.99 times more return on investment than Danaher. However, Sonic Healthcare Ltd is 1.01 times less risky than Danaher. It trades about -0.04 of its potential returns per unit of risk. Danaher is currently generating about -0.05 per unit of risk. If you would invest  1,709  in Sonic Healthcare Ltd on December 19, 2024 and sell it today you would lose (94.00) from holding Sonic Healthcare Ltd or give up 5.5% of portfolio value over 90 days.

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

Sonic Healthcare Ltd  vs.  Danaher

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.

Danaher

Risk-Adjusted Performance

Very Weak

Over the last 90 days Danaher has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Danaher is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Sonic Healthcare and Danaher

The main advantage of trading using opposite Sonic Healthcare and Danaher positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sonic Healthcare position performs unexpectedly, Danaher 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 Danaher will offset losses from the drop in Danaher's long position.

The idea behind Sonic Healthcare Ltd and Danaher 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.