Correlation Between West Pharmaceutical and Alcon AG
Can any of the company-specific risk be diversified away by investing in both West Pharmaceutical and Alcon AG 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 West Pharmaceutical and Alcon AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between West Pharmaceutical Services and Alcon AG, you can compare the effects of market volatilities on West Pharmaceutical and Alcon AG 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 West Pharmaceutical with a short position of Alcon AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of West Pharmaceutical and Alcon AG.
Diversification Opportunities for West Pharmaceutical and Alcon AG
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between West and Alcon is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding West Pharmaceutical Services and Alcon AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcon AG and West Pharmaceutical 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 West Pharmaceutical Services are associated (or correlated) with Alcon AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcon AG has no effect on the direction of West Pharmaceutical i.e., West Pharmaceutical and Alcon AG go up and down completely randomly.
Pair Corralation between West Pharmaceutical and Alcon AG
Considering the 90-day investment horizon West Pharmaceutical Services is expected to generate 2.54 times more return on investment than Alcon AG. However, West Pharmaceutical is 2.54 times more volatile than Alcon AG. It trades about 0.1 of its potential returns per unit of risk. Alcon AG is currently generating about -0.16 per unit of risk. If you would invest 28,707 in West Pharmaceutical Services on October 20, 2024 and sell it today you would earn a total of 4,927 from holding West Pharmaceutical Services or generate 17.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
West Pharmaceutical Services vs. Alcon AG
Performance |
| Timeline |
| West Pharmaceutical |
| Alcon AG |
West Pharmaceutical and Alcon AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with West Pharmaceutical and Alcon AG
The main advantage of trading using opposite West Pharmaceutical and Alcon AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if West Pharmaceutical position performs unexpectedly, Alcon AG 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 Alcon AG will offset losses from the drop in Alcon AG's long position.| West Pharmaceutical vs. Teleflex Incorporated | West Pharmaceutical vs. Alcon AG | West Pharmaceutical vs. ResMed Inc | West Pharmaceutical vs. ICU Medical |
| Alcon AG vs. Teleflex Incorporated | Alcon AG vs. West Pharmaceutical Services | Alcon AG vs. ResMed Inc | Alcon AG 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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