Correlation Between Mettler Toledo and Sotera Health

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

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

Diversification Opportunities for Mettler Toledo and Sotera Health

0.61

Correlation Coefficient

Mettler Toledo  Sotera Health

Poor diversification

The 3 months correlation between Mettler and Sotera is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Mettler Toledo International and Sotera Health Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sotera Health and Mettler Toledo 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 Mettler Toledo International 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 Mettler Toledo i.e., Mettler Toledo and Sotera Health go up and down completely randomly.

Pair Corralation between Mettler Toledo and Sotera Health

Considering the 90-day investment horizon Mettler Toledo International is expected to generate 0.72 times more return on investment than Sotera Health. However, Mettler Toledo International is 1.38 times less risky than Sotera Health. It trades about -0.03 of its potential returns per unit of risk. Sotera Health Co is currently generating about -0.08 per unit of risk. If you would invest  121,992  in Mettler Toledo International on December 28, 2024 and sell it today you would lose (4,571) from holding Mettler Toledo International or give up 3.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Mettler Toledo International  vs.  Sotera Health Co

Mettler Toledo Inter

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mettler Toledo International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Mettler Toledo is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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 latest inconsistent performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Mettler Toledo and Sotera Health

The main advantage of trading using opposite Mettler Toledo and Sotera Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mettler Toledo 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 Mettler Toledo International 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.