Correlation Between Thermo Fisher and WuXi AppTec

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Can any of the company-specific risk be diversified away by investing in both Thermo Fisher and WuXi AppTec 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 Thermo Fisher and WuXi AppTec into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Thermo Fisher Scientific and WuXi AppTec Co, you can compare the effects of market volatilities on Thermo Fisher and WuXi AppTec 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 Thermo Fisher with a short position of WuXi AppTec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thermo Fisher and WuXi AppTec.

Diversification Opportunities for Thermo Fisher and WuXi AppTec

-0.42
  Correlation Coefficient

Very good diversification

The 3 months correlation between Thermo and WuXi is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Thermo Fisher Scientific and WuXi AppTec Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WuXi AppTec and Thermo Fisher 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 Thermo Fisher Scientific are associated (or correlated) with WuXi AppTec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WuXi AppTec has no effect on the direction of Thermo Fisher i.e., Thermo Fisher and WuXi AppTec go up and down completely randomly.

Pair Corralation between Thermo Fisher and WuXi AppTec

Considering the 90-day investment horizon Thermo Fisher Scientific is expected to generate 0.87 times more return on investment than WuXi AppTec. However, Thermo Fisher Scientific is 1.15 times less risky than WuXi AppTec. It trades about 0.4 of its potential returns per unit of risk. WuXi AppTec Co is currently generating about -0.28 per unit of risk. If you would invest  51,669  in Thermo Fisher Scientific on October 20, 2024 and sell it today you would earn a total of  4,296  from holding Thermo Fisher Scientific or generate 8.31% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy95.0%
ValuesDaily Returns

Thermo Fisher Scientific  vs.  WuXi AppTec Co

 Performance 
       Timeline  
Thermo Fisher Scientific 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Thermo Fisher Scientific has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Thermo Fisher is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.
WuXi AppTec 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in WuXi AppTec Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, WuXi AppTec reported solid returns over the last few months and may actually be approaching a breakup point.

Thermo Fisher and WuXi AppTec Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Thermo Fisher and WuXi AppTec

The main advantage of trading using opposite Thermo Fisher and WuXi AppTec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thermo Fisher position performs unexpectedly, WuXi AppTec 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 WuXi AppTec will offset losses from the drop in WuXi AppTec's long position.
The idea behind Thermo Fisher Scientific and WuXi AppTec Co 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.
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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