Correlation Between West Pharmaceutical and BioLife Solutions
Can any of the company-specific risk be diversified away by investing in both West Pharmaceutical and BioLife Solutions 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 BioLife Solutions 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 BioLife Solutions, you can compare the effects of market volatilities on West Pharmaceutical and BioLife Solutions 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 BioLife Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of West Pharmaceutical and BioLife Solutions.
Diversification Opportunities for West Pharmaceutical and BioLife Solutions
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between West and BioLife is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding West Pharmaceutical Services and BioLife Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BioLife Solutions 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 BioLife Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BioLife Solutions has no effect on the direction of West Pharmaceutical i.e., West Pharmaceutical and BioLife Solutions go up and down completely randomly.
Pair Corralation between West Pharmaceutical and BioLife Solutions
Considering the 90-day investment horizon West Pharmaceutical Services is expected to generate 0.62 times more return on investment than BioLife Solutions. However, West Pharmaceutical Services is 1.61 times less risky than BioLife Solutions. It trades about 0.11 of its potential returns per unit of risk. BioLife Solutions is currently generating about 0.01 per unit of risk. If you would invest 32,701 in West Pharmaceutical Services on October 20, 2024 and sell it today you would earn a total of 933.00 from holding West Pharmaceutical Services or generate 2.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
West Pharmaceutical Services vs. BioLife Solutions
Performance |
| Timeline |
| West Pharmaceutical |
| BioLife Solutions |
West Pharmaceutical and BioLife Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with West Pharmaceutical and BioLife Solutions
The main advantage of trading using opposite West Pharmaceutical and BioLife Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if West Pharmaceutical position performs unexpectedly, BioLife Solutions 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 BioLife Solutions will offset losses from the drop in BioLife Solutions' long position.| West Pharmaceutical vs. Teleflex Incorporated | West Pharmaceutical vs. Alcon AG | West Pharmaceutical vs. ResMed Inc | West Pharmaceutical vs. ICU Medical |
| BioLife Solutions vs. Akoya Biosciences | BioLife Solutions vs. AtriCure | BioLife Solutions vs. ICU Medical | BioLife Solutions vs. Haemonetics |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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