Correlation Between Sotera Health and Xencor

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

Diversification Opportunities for Sotera Health and Xencor

-0.84

Correlation Coefficient

Sotera Health  Xencor

Pay attention - limited upside

The 3 months correlation between Sotera and Xencor is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Sotera Health Co and Xencor Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xencor Inc 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 Xencor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xencor Inc has no effect on the direction of Sotera Health i.e., Sotera Health and Xencor go up and down completely randomly.

Pair Corralation between Sotera Health and Xencor

Considering the 90-day investment horizon Sotera Health Co is expected to under-perform the Xencor. But the stock apears to be less risky and, when comparing its historical volatility, Sotera Health Co is 1.27 times less risky than Xencor. The stock trades about -0.01 of its potential returns per unit of risk. The Xencor Inc is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,830  in Xencor Inc on October 4, 2024 and sell it today you would lose (448.00) from holding Xencor Inc or give up 15.83% of portfolio value over 90 days.

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

Sotera Health Co  vs.  Xencor Inc

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 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.

Xencor Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xencor Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Xencor reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sotera Health and Xencor

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

The idea behind Sotera Health Co and Xencor Inc 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.