Correlation Between Waters and Sotera Health

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

By analyzing existing cross correlation between Waters and Sotera Health Co, you can compare the effects of market volatilities on Waters and Sotera Health 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 Waters with a short position of Sotera Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waters and Sotera Health.

Diversification Opportunities for Waters and Sotera Health

0.47

Correlation Coefficient

Waters  Sotera Health

Very weak diversification

The 3 months correlation between Waters and Sotera is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Waters and Sotera Health Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sotera Health and Waters 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 Waters are associated (or correlated) with Sotera Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sotera Health has no effect on the direction of Waters i.e., Waters and Sotera Health go up and down completely randomly.

Pair Corralation between Waters and Sotera Health

Considering the 90-day investment horizon Waters is expected to generate 0.83 times more return on investment than Sotera Health. However, Waters is 1.21 times less risky than Sotera Health. It trades about 0.01 of its potential returns per unit of risk. Sotera Health Co is currently generating about -0.08 per unit of risk. If you would invest  37,094  in Waters on December 28, 2024 and sell it today you would lose (35.00) from holding Waters or give up 0.09% of portfolio value over 90 days.

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

Waters  vs.  Sotera Health Co

Waters

Risk-Adjusted Performance

Very Weak

Over the last 90 days Waters has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Waters is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with Waters and Sotera Health

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

The idea behind Waters and Sotera Health Co 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.