Correlation Between Strickland Metals and Sonic Healthcare

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

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

Diversification Opportunities for Strickland Metals and Sonic Healthcare

0.26

Correlation Coefficient

Strickland Metals  Sonic Healthcare

Modest diversification

The 3 months correlation between Strickland and Sonic is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Strickland Metals and Sonic Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonic Healthcare and Strickland Metals 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 Strickland Metals are associated (or correlated) with Sonic Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonic Healthcare has no effect on the direction of Strickland Metals i.e., Strickland Metals and Sonic Healthcare go up and down completely randomly.

Pair Corralation between Strickland Metals and Sonic Healthcare

Assuming the 90 days trading horizon Strickland Metals is expected to generate 4.39 times more return on investment than Sonic Healthcare. However, Strickland Metals is 4.39 times more volatile than Sonic Healthcare. It trades about 0.06 of its potential returns per unit of risk. Sonic Healthcare is currently generating about 0.0 per unit of risk. If you would invest  4.00  in Strickland Metals on September 29, 2024 and sell it today you would earn a total of  4.50  from holding Strickland Metals or generate 112.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Strickland Metals  vs.  Sonic Healthcare

Strickland Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Strickland Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward-looking signals, Strickland Metals is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Sonic Healthcare

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sonic Healthcare are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Sonic Healthcare is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Strickland Metals and Sonic Healthcare

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

The idea behind Strickland Metals and Sonic Healthcare 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.