Correlation Between Nexgel and West Pharmaceutical
Can any of the company-specific risk be diversified away by investing in both Nexgel 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 Nexgel and West Pharmaceutical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nexgel Inc and West Pharmaceutical Services, you can compare the effects of market volatilities on Nexgel 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 Nexgel with a short position of West Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nexgel and West Pharmaceutical.
Diversification Opportunities for Nexgel and West Pharmaceutical
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Nexgel and West is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Nexgel Inc and West Pharmaceutical Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Pharmaceutical and Nexgel 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 Nexgel Inc 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 Nexgel i.e., Nexgel and West Pharmaceutical go up and down completely randomly.
Pair Corralation between Nexgel and West Pharmaceutical
Given the investment horizon of 90 days Nexgel Inc is expected to generate 1.79 times more return on investment than West Pharmaceutical. However, Nexgel is 1.79 times more volatile than West Pharmaceutical Services. It trades about 0.15 of its potential returns per unit of risk. West Pharmaceutical Services is currently generating about 0.06 per unit of risk. If you would invest 295.00 in Nexgel Inc on August 28, 2024 and sell it today you would earn a total of 42.00 from holding Nexgel Inc or generate 14.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nexgel Inc vs. West Pharmaceutical Services
Performance |
| Timeline |
| Nexgel Inc |
| West Pharmaceutical |
Nexgel and West Pharmaceutical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nexgel and West Pharmaceutical
The main advantage of trading using opposite Nexgel and West Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nexgel 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.The idea behind Nexgel Inc and West Pharmaceutical Services 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.| 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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