Correlation Between Sotera Health and Sera Prognostics

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

Diversification Opportunities for Sotera Health and Sera Prognostics

0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between Sotera and Sera is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Sotera Health Co and Sera Prognostics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sera Prognostics 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 Sera Prognostics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sera Prognostics has no effect on the direction of Sotera Health i.e., Sotera Health and Sera Prognostics go up and down completely randomly.

Pair Corralation between Sotera Health and Sera Prognostics

Considering the 90-day investment horizon Sotera Health Co is expected to under-perform the Sera Prognostics. But the stock apears to be less risky and, when comparing its historical volatility, Sotera Health Co is 2.94 times less risky than Sera Prognostics. The stock trades about -0.41 of its potential returns per unit of risk. The Sera Prognostics is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  705.00  in Sera Prognostics on August 24, 2024 and sell it today you would lose (94.00) from holding Sera Prognostics or give up 13.33% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Sotera Health Co  vs.  Sera Prognostics

 Performance 
       Timeline  
Sotera Health 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 inconsistent performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
Sera Prognostics 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Sera Prognostics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Sotera Health and Sera Prognostics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sotera Health and Sera Prognostics

The main advantage of trading using opposite Sotera Health and Sera Prognostics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sotera Health position performs unexpectedly, Sera Prognostics 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 Sera Prognostics will offset losses from the drop in Sera Prognostics' long position.
The idea behind Sotera Health Co and Sera Prognostics 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.

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