Correlation Between Penumbra and STERIS Plc

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

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

Diversification Opportunities for Penumbra and STERIS Plc

-0.81

Correlation Coefficient

Penumbra  STERIS Plc

Pay attention - limited upside

The 3 months correlation between Penumbra and STERIS is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Penumbra and STERIS plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STERIS plc and Penumbra 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 Penumbra are associated (or correlated) with STERIS Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STERIS plc has no effect on the direction of Penumbra i.e., Penumbra and STERIS Plc go up and down completely randomly.

Pair Corralation between Penumbra and STERIS Plc

Considering the 90-day investment horizon Penumbra is expected to generate 1.92 times more return on investment than STERIS Plc. However, Penumbra is 1.92 times more volatile than STERIS plc. It trades about 0.15 of its potential returns per unit of risk. STERIS plc is currently generating about -0.18 per unit of risk. If you would invest  20,001  in Penumbra on September 12, 2024 and sell it today you would earn a total of  4,226  from holding Penumbra or generate 21.13% return on investment over 90 days.

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

Penumbra  vs.  STERIS plc

Penumbra

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Penumbra are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Penumbra displayed solid returns over the last few months and may actually be approaching a breakup point.

STERIS plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STERIS plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic 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 Penumbra and STERIS Plc

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

The idea behind Penumbra and STERIS plc 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.