Correlation Between Natera and Sotera Health

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

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

Diversification Opportunities for Natera and Sotera Health

-0.91

Correlation Coefficient

Natera  Sotera Health

Pay attention - limited upside

The 3 months correlation between Natera and Sotera is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Natera 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 Natera 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 Natera 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 Natera i.e., Natera and Sotera Health go up and down completely randomly.

Pair Corralation between Natera and Sotera Health

Given the investment horizon of 90 days Natera Inc is expected to generate 1.66 times more return on investment than Sotera Health. However, Natera is 1.66 times more volatile than Sotera Health Co. It trades about 0.15 of its potential returns per unit of risk. Sotera Health Co is currently generating about -0.16 per unit of risk. If you would invest  12,512  in Natera Inc on September 12, 2024 and sell it today you would earn a total of  4,133  from holding Natera Inc or generate 33.03% return on investment over 90 days.

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

Natera Inc  vs.  Sotera Health Co

Natera Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Natera Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Natera sustained 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 Natera and Sotera Health

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

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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 Commodity Directory module to find actively traded commodities issued by global exchanges.