Correlation Between Sonic Healthcare and Sandfire Resources

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

By analyzing existing cross correlation between Sonic Healthcare and Sandfire Resources NL, you can compare the effects of market volatilities on Sonic Healthcare and Sandfire Resources 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 Sandfire Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonic Healthcare and Sandfire Resources.

Diversification Opportunities for Sonic Healthcare and Sandfire Resources

0.12

Correlation Coefficient

Sonic Healthcare  Sandfire Resources

Average diversification

The 3 months correlation between Sonic and Sandfire is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Sonic Healthcare and Sandfire Resources NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandfire Resources 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 are associated (or correlated) with Sandfire Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandfire Resources has no effect on the direction of Sonic Healthcare i.e., Sonic Healthcare and Sandfire Resources go up and down completely randomly.

Pair Corralation between Sonic Healthcare and Sandfire Resources

Assuming the 90 days trading horizon Sonic Healthcare is expected to generate 1.22 times less return on investment than Sandfire Resources. But when comparing it to its historical volatility, Sonic Healthcare is 1.42 times less risky than Sandfire Resources. It trades about 0.06 of its potential returns per unit of risk. Sandfire Resources NL is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  916.00  in Sandfire Resources NL on September 19, 2024 and sell it today you would earn a total of  45.00  from holding Sandfire Resources NL or generate 4.91% return on investment over 90 days.

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

Sonic Healthcare  vs.  Sandfire Resources NL

Sonic Healthcare

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sonic Healthcare are ranked lower than 4 (%) 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.

Sandfire Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sandfire Resources NL are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Sandfire Resources 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 Sonic Healthcare and Sandfire Resources

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

The idea behind Sonic Healthcare and Sandfire Resources NL 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.