Correlation Between Sotera Health and IDEXX Laboratories

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

Diversification Opportunities for Sotera Health and IDEXX Laboratories

0.36

Correlation Coefficient

Sotera Health  IDEXX Laboratories

Weak diversification

The 3 months correlation between Sotera and IDEXX is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Sotera Health Co and IDEXX Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDEXX Laboratories 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 IDEXX Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDEXX Laboratories has no effect on the direction of Sotera Health i.e., Sotera Health and IDEXX Laboratories go up and down completely randomly.

Pair Corralation between Sotera Health and IDEXX Laboratories

Considering the 90-day investment horizon Sotera Health Co is expected to under-perform the IDEXX Laboratories. In addition to that, Sotera Health is 1.07 times more volatile than IDEXX Laboratories. It trades about -0.08 of its total potential returns per unit of risk. IDEXX Laboratories is currently generating about 0.03 per unit of volatility. If you would invest  41,275  in IDEXX Laboratories on December 28, 2024 and sell it today you would earn a total of  979.00  from holding IDEXX Laboratories or generate 2.37% return on investment over 90 days.

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

Sotera Health Co  vs.  IDEXX Laboratories

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.

IDEXX Laboratories

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IDEXX Laboratories are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, IDEXX Laboratories is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sotera Health and IDEXX Laboratories

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

The idea behind Sotera Health Co and IDEXX Laboratories 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.