Correlation Between Essilor International and West Pharmaceutical
Can any of the company-specific risk be diversified away by investing in both Essilor International 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 Essilor International and West Pharmaceutical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Essilor International SA and West Pharmaceutical Services, you can compare the effects of market volatilities on Essilor International 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 Essilor International with a short position of West Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Essilor International and West Pharmaceutical.
Diversification Opportunities for Essilor International and West Pharmaceutical
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Essilor and West is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Essilor International SA and West Pharmaceutical Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Pharmaceutical and Essilor International 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 Essilor International SA 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 Essilor International i.e., Essilor International and West Pharmaceutical go up and down completely randomly.
Pair Corralation between Essilor International and West Pharmaceutical
Assuming the 90 days horizon Essilor International SA is expected to generate 0.6 times more return on investment than West Pharmaceutical. However, Essilor International SA is 1.68 times less risky than West Pharmaceutical. It trades about 0.07 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 9,082 in Essilor International SA on November 2, 2024 and sell it today you would earn a total of 4,711 from holding Essilor International SA or generate 51.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Essilor International SA vs. West Pharmaceutical Services
Performance |
| Timeline |
| Essilor International |
| West Pharmaceutical |
Essilor International and West Pharmaceutical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Essilor International and West Pharmaceutical
The main advantage of trading using opposite Essilor International and West Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Essilor International 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.| Essilor International vs. Sysmex Corp | Essilor International vs. Straumann Holding AG | Essilor International vs. Coloplast AS | Essilor International vs. EssilorLuxottica Socit anonyme |
| 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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