Correlation Between Sonic Healthcare and ICON PLC

Can any of the company-specific risk be diversified away by investing in both Sonic Healthcare and ICON PLC 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 ICON PLC 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 ICON PLC, you can compare the effects of market volatilities on Sonic Healthcare and ICON PLC 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 ICON PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonic Healthcare and ICON PLC.

Diversification Opportunities for Sonic Healthcare and ICON PLC

0.49

Correlation Coefficient

Sonic Healthcare  ICON PLC

Very weak diversification

The 3 months correlation between Sonic and ICON is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Sonic Healthcare Ltd and ICON PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICON PLC 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 ICON PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICON PLC has no effect on the direction of Sonic Healthcare i.e., Sonic Healthcare and ICON PLC go up and down completely randomly.

Pair Corralation between Sonic Healthcare and ICON PLC

Assuming the 90 days horizon Sonic Healthcare Ltd is expected to under-perform the ICON PLC. In addition to that, Sonic Healthcare is 1.06 times more volatile than ICON PLC. It trades about -0.1 of its total potential returns per unit of risk. ICON PLC is currently generating about 0.14 per unit of volatility. If you would invest  21,218  in ICON PLC on October 12, 2024 and sell it today you would earn a total of  716.00  from holding ICON PLC or generate 3.37% return on investment over 90 days.

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

Sonic Healthcare Ltd  vs.  ICON PLC

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.

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.

Pair Trading with Sonic Healthcare and ICON PLC

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

The idea behind Sonic Healthcare Ltd and ICON PLC 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.