Correlation Between EssilorLuxottica and West Pharmaceutical
Can any of the company-specific risk be diversified away by investing in both EssilorLuxottica and West Pharmaceutical 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 EssilorLuxottica and West Pharmaceutical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EssilorLuxottica Socit anonyme and West Pharmaceutical Services, you can compare the effects of market volatilities on EssilorLuxottica and West Pharmaceutical 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 EssilorLuxottica with a short position of West Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of EssilorLuxottica and West Pharmaceutical.
Diversification Opportunities for EssilorLuxottica and West Pharmaceutical
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between EssilorLuxottica and West is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding EssilorLuxottica Socit anonyme and West Pharmaceutical Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Pharmaceutical and EssilorLuxottica 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 EssilorLuxottica Socit anonyme are associated (or correlated) with West Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Pharmaceutical has no effect on the direction of EssilorLuxottica i.e., EssilorLuxottica and West Pharmaceutical go up and down completely randomly.
Pair Corralation between EssilorLuxottica and West Pharmaceutical
Assuming the 90 days horizon EssilorLuxottica Socit anonyme is expected to generate 0.82 times more return on investment than West Pharmaceutical. However, EssilorLuxottica Socit anonyme is 1.22 times less risky than West Pharmaceutical. It trades about 0.06 of its potential returns per unit of risk. West Pharmaceutical Services is currently generating about 0.03 per unit of risk. If you would invest 17,606 in EssilorLuxottica Socit anonyme on November 2, 2024 and sell it today you would earn a total of 10,034 from holding EssilorLuxottica Socit anonyme or generate 56.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
EssilorLuxottica Socit anonyme vs. West Pharmaceutical Services
Performance |
| Timeline |
| EssilorLuxottica Socit |
| West Pharmaceutical |
EssilorLuxottica and West Pharmaceutical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EssilorLuxottica and West Pharmaceutical
The main advantage of trading using opposite EssilorLuxottica and West Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EssilorLuxottica position performs unexpectedly, West Pharmaceutical 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 West Pharmaceutical will offset losses from the drop in West Pharmaceutical's long position.| EssilorLuxottica vs. Coloplast A | EssilorLuxottica vs. Carl Zeiss Meditec | EssilorLuxottica vs. Carl Zeiss Meditec | EssilorLuxottica vs. Hoya Corp |
| West Pharmaceutical vs. Teleflex Incorporated | West Pharmaceutical vs. Alcon AG | West Pharmaceutical vs. ResMed Inc | West Pharmaceutical vs. ICU Medical |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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