Correlation Between Straumann Holding and West Pharmaceutical
Can any of the company-specific risk be diversified away by investing in both Straumann Holding 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 Straumann Holding and West Pharmaceutical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Straumann Holding AG and West Pharmaceutical Services, you can compare the effects of market volatilities on Straumann Holding 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 Straumann Holding with a short position of West Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Straumann Holding and West Pharmaceutical.
Diversification Opportunities for Straumann Holding and West Pharmaceutical
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Straumann and West is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Straumann Holding AG and West Pharmaceutical Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Pharmaceutical and Straumann Holding 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 Straumann Holding AG 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 Straumann Holding i.e., Straumann Holding and West Pharmaceutical go up and down completely randomly.
Pair Corralation between Straumann Holding and West Pharmaceutical
Assuming the 90 days horizon Straumann Holding is expected to generate 1.7 times less return on investment than West Pharmaceutical. But when comparing it to its historical volatility, Straumann Holding AG is 1.01 times less risky than West Pharmaceutical. It trades about 0.02 of its potential returns per unit of risk. West Pharmaceutical Services is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 27,222 in West Pharmaceutical Services on November 2, 2024 and sell it today you would earn a total of 6,924 from holding West Pharmaceutical Services or generate 25.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Straumann Holding AG vs. West Pharmaceutical Services
Performance |
| Timeline |
| Straumann Holding |
| West Pharmaceutical |
Straumann Holding and West Pharmaceutical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Straumann Holding and West Pharmaceutical
The main advantage of trading using opposite Straumann Holding and West Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Straumann Holding 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.| Straumann Holding vs. Sysmex Corp | Straumann Holding vs. Coloplast AS | Straumann Holding vs. Essilor International SA | Straumann Holding 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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