Correlation Between Biodesix and Sotera Health

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

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

Diversification Opportunities for Biodesix and Sotera Health

0.76

Correlation Coefficient

Biodesix  Sotera Health

Poor diversification

The 3 months correlation between Biodesix and Sotera is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Biodesix and Sotera Health Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sotera Health and Biodesix 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 Biodesix 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 Biodesix i.e., Biodesix and Sotera Health go up and down completely randomly.

Pair Corralation between Biodesix and Sotera Health

Given the investment horizon of 90 days Biodesix is expected to generate 1.43 times more return on investment than Sotera Health. However, Biodesix is 1.43 times more volatile than Sotera Health Co. It trades about 0.12 of its potential returns per unit of risk. Sotera Health Co is currently generating about -0.05 per unit of risk. If you would invest  124.00  in Biodesix on September 20, 2024 and sell it today you would earn a total of  10.00  from holding Biodesix or generate 8.06% return on investment over 90 days.

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

Biodesix  vs.  Sotera Health Co

Biodesix

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biodesix 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 basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company 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 unfluctuating performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Biodesix and Sotera Health

The main advantage of trading using opposite Biodesix and Sotera Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biodesix 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 Biodesix 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.