Correlation Between West Pharmaceutical and Catalent
Can any of the company-specific risk be diversified away by investing in both West Pharmaceutical and Catalent 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 Catalent 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 Catalent, you can compare the effects of market volatilities on West Pharmaceutical and Catalent 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 Catalent. Check out your portfolio center. Please also check ongoing floating volatility patterns of West Pharmaceutical and Catalent.
Diversification Opportunities for West Pharmaceutical and Catalent
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between West and Catalent is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding West Pharmaceutical Services and Catalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalent 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 Catalent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalent has no effect on the direction of West Pharmaceutical i.e., West Pharmaceutical and Catalent go up and down completely randomly.
Pair Corralation between West Pharmaceutical and Catalent
Considering the 90-day investment horizon West Pharmaceutical Services is expected to generate 5.99 times more return on investment than Catalent. However, West Pharmaceutical is 5.99 times more volatile than Catalent. It trades about 0.13 of its potential returns per unit of risk. Catalent is currently generating about -0.02 per unit of risk. If you would invest 28,622 in West Pharmaceutical Services on August 23, 2024 and sell it today you would earn a total of 3,466 from holding West Pharmaceutical Services or generate 12.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
West Pharmaceutical Services vs. Catalent
Performance |
| Timeline |
| West Pharmaceutical |
| Catalent |
West Pharmaceutical and Catalent Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with West Pharmaceutical and Catalent
The main advantage of trading using opposite West Pharmaceutical and Catalent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if West Pharmaceutical position performs unexpectedly, Catalent 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 Catalent will offset losses from the drop in Catalent's long position.| West Pharmaceutical vs. Teleflex Incorporated | West Pharmaceutical vs. Alcon AG | West Pharmaceutical vs. ResMed Inc | West Pharmaceutical vs. ICU Medical |
| Catalent vs. IQVIA Holdings | Catalent vs. West Pharmaceutical Services | Catalent vs. Charles River Laboratories | Catalent vs. Bio Rad Laboratories |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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