Correlation Between MediciNova and Sotera Health

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

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

Diversification Opportunities for MediciNova and Sotera Health

-0.64

Correlation Coefficient

MediciNova  Sotera Health

Excellent diversification

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

Pair Corralation between MediciNova and Sotera Health

Given the investment horizon of 90 days MediciNova is expected to generate 1.76 times more return on investment than Sotera Health. However, MediciNova is 1.76 times more volatile than Sotera Health Co. It trades about 0.16 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  190.00  in MediciNova on September 20, 2024 and sell it today you would earn a total of  25.00  from holding MediciNova or generate 13.16% return on investment over 90 days.

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

MediciNova  vs.  Sotera Health Co

MediciNova

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MediciNova are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, MediciNova showed solid returns over the last few months and may actually be approaching a breakup point.

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 MediciNova and Sotera Health

The main advantage of trading using opposite MediciNova and Sotera Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MediciNova 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 MediciNova 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.

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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.