Correlation Between ICON PLC and Sotera Health

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

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

Diversification Opportunities for ICON PLC and Sotera Health

0.64

Correlation Coefficient

ICON PLC  Sotera Health

Poor diversification

The 3 months correlation between ICON and Sotera is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding ICON PLC and Sotera Health Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sotera Health and ICON PLC 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 ICON PLC 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 ICON PLC i.e., ICON PLC and Sotera Health go up and down completely randomly.

Pair Corralation between ICON PLC and Sotera Health

Given the investment horizon of 90 days ICON PLC is expected to under-perform the Sotera Health. But the stock apears to be less risky and, when comparing its historical volatility, ICON PLC is 1.06 times less risky than Sotera Health. The stock trades about -0.13 of its potential returns per unit of risk. The Sotera Health Co is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  1,348  in Sotera Health Co on December 27, 2024 and sell it today you would lose (179.00) from holding Sotera Health Co or give up 13.28% of portfolio value over 90 days.

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

ICON PLC  vs.  Sotera Health Co

ICON PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days ICON PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's essential indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Sotera Health

Risk-Adjusted Performance

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 April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with ICON PLC and Sotera Health

The main advantage of trading using opposite ICON PLC and Sotera Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ICON PLC 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 ICON PLC 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.