Correlation Between Sonic Healthcare and Lonza

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

Diversification Opportunities for Sonic Healthcare and Lonza

0.15

Correlation Coefficient

Sonic Healthcare  Lonza

Average diversification

The 3 months correlation between Sonic and Lonza is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Sonic Healthcare Ltd and Lonza Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lonza Group 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 Lonza. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lonza Group has no effect on the direction of Sonic Healthcare i.e., Sonic Healthcare and Lonza go up and down completely randomly.

Pair Corralation between Sonic Healthcare and Lonza

Assuming the 90 days horizon Sonic Healthcare Ltd is expected to under-perform the Lonza. But the pink sheet apears to be less risky and, when comparing its historical volatility, Sonic Healthcare Ltd is 1.37 times less risky than Lonza. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Lonza Group is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  60,973  in Lonza Group on October 10, 2024 and sell it today you would lose (23.00) from holding Lonza Group or give up 0.04% of portfolio value over 90 days.

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

Sonic Healthcare Ltd  vs.  Lonza Group

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Lonza Group

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lonza Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Lonza is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sonic Healthcare and Lonza

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

The idea behind Sonic Healthcare Ltd and Lonza Group 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.