Correlation Between STERIS Plc and Heart Test

Can any of the company-specific risk be diversified away by investing in both STERIS Plc and Heart Test 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 STERIS Plc and Heart Test into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between STERIS plc and Heart Test Laboratories, you can compare the effects of market volatilities on STERIS Plc and Heart Test 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 STERIS Plc with a short position of Heart Test. Check out your portfolio center. Please also check ongoing floating volatility patterns of STERIS Plc and Heart Test.

Diversification Opportunities for STERIS Plc and Heart Test

-0.18

Correlation Coefficient

STERIS Plc  Heart Test

Good diversification

The 3 months correlation between STERIS and Heart is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding STERIS plc and Heart Test Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heart Test Laboratories and STERIS Plc 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 STERIS plc are associated (or correlated) with Heart Test. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heart Test Laboratories has no effect on the direction of STERIS Plc i.e., STERIS Plc and Heart Test go up and down completely randomly.

Pair Corralation between STERIS Plc and Heart Test

Considering the 90-day investment horizon STERIS plc is expected to generate 0.15 times more return on investment than Heart Test. However, STERIS plc is 6.56 times less risky than Heart Test. It trades about -0.01 of its potential returns per unit of risk. Heart Test Laboratories is currently generating about -0.06 per unit of risk. If you would invest  22,602  in STERIS plc on October 4, 2024 and sell it today you would lose (2,046) from holding STERIS plc or give up 9.05% of portfolio value over 90 days.

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

STERIS plc  vs.  Heart Test Laboratories

STERIS plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STERIS plc 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 sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Heart Test Laboratories

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heart Test Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Heart Test 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 STERIS Plc and Heart Test

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

The idea behind STERIS plc and Heart Test 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..