Correlation Between Sotera Health and Aclaris Therapeutics

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

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

Diversification Opportunities for Sotera Health and Aclaris Therapeutics

0.82

Correlation Coefficient

Sotera Health  Aclaris Therapeutics

Very poor diversification

The 3 months correlation between Sotera and Aclaris is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Sotera Health Co and Aclaris Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aclaris Therapeutics and Sotera Health 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 Sotera Health Co are associated (or correlated) with Aclaris Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aclaris Therapeutics has no effect on the direction of Sotera Health i.e., Sotera Health and Aclaris Therapeutics go up and down completely randomly.

Pair Corralation between Sotera Health and Aclaris Therapeutics

Considering the 90-day investment horizon Sotera Health Co is expected to generate 0.72 times more return on investment than Aclaris Therapeutics. However, Sotera Health Co is 1.39 times less risky than Aclaris Therapeutics. It trades about -0.08 of its potential returns per unit of risk. Aclaris Therapeutics is currently generating about -0.22 per unit of risk. If you would invest  1,336  in Sotera Health Co on December 29, 2024 and sell it today you would lose (159.00) from holding Sotera Health Co or give up 11.9% of portfolio value over 90 days.

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

Sotera Health Co  vs.  Aclaris Therapeutics

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.

Aclaris Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aclaris Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Sotera Health and Aclaris Therapeutics

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

The idea behind Sotera Health Co and Aclaris Therapeutics 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.