Correlation Between Sotera Health and DarioHealth Corp

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

Diversification Opportunities for Sotera Health and DarioHealth Corp

0.51

Correlation Coefficient

Sotera Health  DarioHealth Corp

Very weak diversification

The 3 months correlation between Sotera and DarioHealth is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Sotera Health Co and DarioHealth Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DarioHealth Corp 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 DarioHealth Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DarioHealth Corp has no effect on the direction of Sotera Health i.e., Sotera Health and DarioHealth Corp go up and down completely randomly.

Pair Corralation between Sotera Health and DarioHealth Corp

Considering the 90-day investment horizon Sotera Health Co is expected to under-perform the DarioHealth Corp. But the stock apears to be less risky and, when comparing its historical volatility, Sotera Health Co is 2.13 times less risky than DarioHealth Corp. The stock trades about -0.09 of its potential returns per unit of risk. The DarioHealth Corp is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  83.00  in DarioHealth Corp on August 31, 2024 and sell it today you would lose (11.00) from holding DarioHealth Corp or give up 13.25% 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.  DarioHealth Corp

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 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.

DarioHealth Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DarioHealth Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, DarioHealth Corp is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sotera Health and DarioHealth Corp

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

The idea behind Sotera Health Co and DarioHealth Corp 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.