Correlation Between Varex Imaging and STERIS Plc

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

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

Diversification Opportunities for Varex Imaging and STERIS Plc

-0.67

Correlation Coefficient

Varex Imaging  STERIS Plc

Excellent diversification

The 3 months correlation between Varex and STERIS is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Varex Imaging Corp and STERIS plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STERIS plc and Varex Imaging 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 Varex Imaging Corp are associated (or correlated) with STERIS Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STERIS plc has no effect on the direction of Varex Imaging i.e., Varex Imaging and STERIS Plc go up and down completely randomly.

Pair Corralation between Varex Imaging and STERIS Plc

Given the investment horizon of 90 days Varex Imaging Corp is expected to under-perform the STERIS Plc. In addition to that, Varex Imaging is 2.95 times more volatile than STERIS plc. It trades about -0.07 of its total potential returns per unit of risk. STERIS plc is currently generating about 0.14 per unit of volatility. If you would invest  20,455  in STERIS plc on December 28, 2024 and sell it today you would earn a total of  1,968  from holding STERIS plc or generate 9.62% return on investment over 90 days.

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

Varex Imaging Corp  vs.  STERIS plc

Varex Imaging Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Varex Imaging Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

STERIS plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in STERIS plc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, STERIS Plc may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Varex Imaging and STERIS Plc

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

The idea behind Varex Imaging Corp and STERIS 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.