Correlation Between Lantheus Holdings and Sonoma Pharmaceuticals

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

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

Diversification Opportunities for Lantheus Holdings and Sonoma Pharmaceuticals

0.43

Correlation Coefficient

Lantheus Holdings  Sonoma Pharmaceuticals

Very weak diversification

The 3 months correlation between Lantheus and Sonoma is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Lantheus Holdings and Sonoma Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonoma Pharmaceuticals and Lantheus Holdings 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 Lantheus Holdings are associated (or correlated) with Sonoma Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonoma Pharmaceuticals has no effect on the direction of Lantheus Holdings i.e., Lantheus Holdings and Sonoma Pharmaceuticals go up and down completely randomly.

Pair Corralation between Lantheus Holdings and Sonoma Pharmaceuticals

Given the investment horizon of 90 days Lantheus Holdings is expected to generate 4.26 times less return on investment than Sonoma Pharmaceuticals. But when comparing it to its historical volatility, Lantheus Holdings is 4.77 times less risky than Sonoma Pharmaceuticals. It trades about 0.1 of its potential returns per unit of risk. Sonoma Pharmaceuticals is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  220.00  in Sonoma Pharmaceuticals on December 29, 2024 and sell it today you would earn a total of  21.00  from holding Sonoma Pharmaceuticals or generate 9.55% return on investment over 90 days.

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

Lantheus Holdings  vs.  Sonoma Pharmaceuticals

Lantheus Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lantheus Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Lantheus Holdings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Sonoma Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sonoma Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sonoma Pharmaceuticals is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lantheus Holdings and Sonoma Pharmaceuticals

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

The idea behind Lantheus Holdings and Sonoma Pharmaceuticals 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.

Check out your portfolio center.

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 Anywhere module to track or share privately all of your investments from the convenience of any device.