Correlation Between Sonic Healthcare and Sotera Health

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

Diversification Opportunities for Sonic Healthcare and Sotera Health

0.13

Correlation Coefficient

Sonic Healthcare  Sotera Health

Average diversification

The 3 months correlation between Sonic and Sotera is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Sonic Healthcare Ltd and Sotera Health Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sotera Health 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 Sotera Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sotera Health has no effect on the direction of Sonic Healthcare i.e., Sonic Healthcare and Sotera Health go up and down completely randomly.

Pair Corralation between Sonic Healthcare and Sotera Health

Assuming the 90 days horizon Sonic Healthcare Ltd is expected to under-perform the Sotera Health. In addition to that, Sonic Healthcare is 1.27 times more volatile than Sotera Health Co. It trades about -0.1 of its total potential returns per unit of risk. Sotera Health Co is currently generating about 0.05 per unit of volatility. If you would invest  1,326  in Sotera Health Co on October 12, 2024 and sell it today you would earn a total of  13.00  from holding Sotera Health Co or generate 0.98% return on investment over 90 days.

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

Sonic Healthcare Ltd  vs.  Sotera Health Co

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.

Sotera Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sotera Health Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Sonic Healthcare and Sotera Health

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

The idea behind Sonic Healthcare Ltd and Sotera Health Co 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..