Correlation Between Sotera Health and Fulgent Genetics

Can any of the company-specific risk be diversified away by investing in both Sotera Health and Fulgent Genetics 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 Fulgent Genetics 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 Fulgent Genetics, you can compare the effects of market volatilities on Sotera Health and Fulgent Genetics 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 Fulgent Genetics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sotera Health and Fulgent Genetics.

Diversification Opportunities for Sotera Health and Fulgent Genetics

0.71

Correlation Coefficient

Sotera Health  Fulgent Genetics

Poor diversification

The 3 months correlation between Sotera and Fulgent is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Sotera Health Co and Fulgent Genetics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fulgent Genetics 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 Fulgent Genetics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fulgent Genetics has no effect on the direction of Sotera Health i.e., Sotera Health and Fulgent Genetics go up and down completely randomly.

Pair Corralation between Sotera Health and Fulgent Genetics

Considering the 90-day investment horizon Sotera Health Co is expected to generate 0.94 times more return on investment than Fulgent Genetics. However, Sotera Health Co is 1.07 times less risky than Fulgent Genetics. It trades about -0.03 of its potential returns per unit of risk. Fulgent Genetics is currently generating about -0.07 per unit of risk. If you would invest  1,889  in Sotera Health Co on September 12, 2024 and sell it today you would lose (569.00) from holding Sotera Health Co or give up 30.12% of portfolio value over 90 days.

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

Sotera Health Co  vs.  Fulgent Genetics

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 fragile 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.

Fulgent Genetics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fulgent Genetics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Fulgent Genetics is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sotera Health and Fulgent Genetics

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

The idea behind Sotera Health Co and Fulgent Genetics 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.