Correlation Between Sotera Health and ICON PLC

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

Diversification Opportunities for Sotera Health and ICON PLC

0.64

Correlation Coefficient

Sotera Health  ICON PLC

Poor diversification

The 3 months correlation between Sotera and ICON is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Sotera Health Co and ICON PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICON PLC 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 ICON PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICON PLC has no effect on the direction of Sotera Health i.e., Sotera Health and ICON PLC go up and down completely randomly.

Pair Corralation between Sotera Health and ICON PLC

Considering the 90-day investment horizon Sotera Health Co is expected to generate 1.06 times more return on investment than ICON PLC. However, Sotera Health is 1.06 times more volatile than ICON PLC. It trades about -0.1 of its potential returns per unit of risk. ICON PLC is currently generating about -0.13 per unit of risk. If you would invest  1,348  in Sotera Health Co on December 27, 2024 and sell it today you would lose (179.00) from holding Sotera Health Co or give up 13.28% 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.  ICON PLC

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 inconsistent performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

ICON PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days ICON PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's essential indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Sotera Health and ICON PLC

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

The idea behind Sotera Health Co and ICON 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.