Correlation Between Sotera Health and Twist Bioscience

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

Diversification Opportunities for Sotera Health and Twist Bioscience

0.72

Correlation Coefficient

Sotera Health  Twist Bioscience

Poor diversification

The 3 months correlation between Sotera and Twist is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Sotera Health Co and Twist Bioscience Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Twist Bioscience Corp 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 Twist Bioscience. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Twist Bioscience Corp has no effect on the direction of Sotera Health i.e., Sotera Health and Twist Bioscience go up and down completely randomly.

Pair Corralation between Sotera Health and Twist Bioscience

Considering the 90-day investment horizon Sotera Health Co is expected to under-perform the Twist Bioscience. But the stock apears to be less risky and, when comparing its historical volatility, Sotera Health Co is 1.75 times less risky than Twist Bioscience. The stock trades about -0.08 of its potential returns per unit of risk. The Twist Bioscience Corp is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  4,723  in Twist Bioscience Corp on December 28, 2024 and sell it today you would lose (565.00) from holding Twist Bioscience Corp or give up 11.96% 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.  Twist Bioscience Corp

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.

Twist Bioscience Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Twist Bioscience Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Sotera Health and Twist Bioscience

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

The idea behind Sotera Health Co and Twist Bioscience Corp 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.