Correlation Between Inotiv and Sotera Health

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

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

Diversification Opportunities for Inotiv and Sotera Health

-0.86

Correlation Coefficient

Inotiv  Sotera Health

Pay attention - limited upside

The 3 months correlation between Inotiv and Sotera is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Inotiv Inc and Sotera Health Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sotera Health and Inotiv 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 Inotiv Inc 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 Inotiv i.e., Inotiv and Sotera Health go up and down completely randomly.

Pair Corralation between Inotiv and Sotera Health

Given the investment horizon of 90 days Inotiv Inc is expected to generate 3.21 times more return on investment than Sotera Health. However, Inotiv is 3.21 times more volatile than Sotera Health Co. It trades about 0.26 of its potential returns per unit of risk. Sotera Health Co is currently generating about -0.31 per unit of risk. If you would invest  333.00  in Inotiv Inc on September 12, 2024 and sell it today you would earn a total of  166.00  from holding Inotiv Inc or generate 49.85% return on investment over 90 days.

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

Inotiv Inc  vs.  Sotera Health Co

Inotiv Inc

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Inotiv Inc are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Inotiv showed solid returns over the last few months and may actually be approaching a breakup point.

Sotera Health

Risk-Adjusted Performance

0 of 100

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 fragile performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Inotiv and Sotera Health

The main advantage of trading using opposite Inotiv and Sotera Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inotiv 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 Inotiv Inc 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.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .