Correlation Between Sotera Health and ICON PLC
Can any of the company-specific risk be diversified away by investing in both Sotera Health and ICON 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 Sotera Health and ICON PLC 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 ICON PLC, you can compare the effects of market volatilities on Sotera Health and ICON 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 Sotera Health with a short position of ICON PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sotera Health and ICON PLC.
Diversification Opportunities for Sotera Health and ICON PLC
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sotera and ICON is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Sotera Health Co and ICON PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICON PLC 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 ICON PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICON PLC has no effect on the direction of Sotera Health i.e., Sotera Health and ICON PLC go up and down completely randomly.
Pair Corralation between Sotera Health and ICON PLC
Considering the 90-day investment horizon Sotera Health Co is expected to under-perform the ICON PLC. But the stock apears to be less risky and, when comparing its historical volatility, Sotera Health Co is 1.01 times less risky than ICON PLC. The stock trades about -0.31 of its potential returns per unit of risk. The ICON PLC is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 22,789 in ICON PLC on August 31, 2024 and sell it today you would lose (1,505) from holding ICON PLC or give up 6.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sotera Health Co vs. ICON PLC
Performance |
| Timeline |
| Sotera Health |
| ICON PLC |
Sotera Health and ICON PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sotera Health and ICON PLC
The main advantage of trading using opposite Sotera Health and ICON PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sotera Health position performs unexpectedly, ICON 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 ICON PLC will offset losses from the drop in ICON PLC's long position.| Sotera Health vs. Qiagen NV | Sotera Health vs. Aclaris Therapeutics | Sotera Health vs. Neogen | Sotera Health vs. RadNet Inc |
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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 CEOs Directory module to screen CEOs from public companies around the world.
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