Correlation Between Sonic Healthcare and Mettler Toledo

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

Diversification Opportunities for Sonic Healthcare and Mettler Toledo

0.59

Correlation Coefficient

Sonic Healthcare  Mettler Toledo

Very weak diversification

The 3 months correlation between Sonic and Mettler is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Sonic Healthcare Ltd and Mettler Toledo International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mettler Toledo Inter 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 Mettler Toledo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mettler Toledo Inter has no effect on the direction of Sonic Healthcare i.e., Sonic Healthcare and Mettler Toledo go up and down completely randomly.

Pair Corralation between Sonic Healthcare and Mettler Toledo

Assuming the 90 days horizon Sonic Healthcare Ltd is expected to under-perform the Mettler Toledo. In addition to that, Sonic Healthcare is 1.12 times more volatile than Mettler Toledo International. It trades about -0.04 of its total potential returns per unit of risk. Mettler Toledo International is currently generating about 0.04 per unit of volatility. If you would invest  120,602  in Mettler Toledo International on December 19, 2024 and sell it today you would earn a total of  3,671  from holding Mettler Toledo International or generate 3.04% 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.  Mettler Toledo International

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.

Mettler Toledo Inter

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mettler Toledo International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Mettler Toledo is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Sonic Healthcare and Mettler Toledo

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

The idea behind Sonic Healthcare Ltd and Mettler Toledo International 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.