Correlation Between West Pharmaceutical and EDAP TMS
Can any of the company-specific risk be diversified away by investing in both West Pharmaceutical and EDAP TMS 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 EDAP TMS 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 EDAP TMS SA, you can compare the effects of market volatilities on West Pharmaceutical and EDAP TMS 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 EDAP TMS. Check out your portfolio center. Please also check ongoing floating volatility patterns of West Pharmaceutical and EDAP TMS.
Diversification Opportunities for West Pharmaceutical and EDAP TMS
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between West and EDAP is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding West Pharmaceutical Services and EDAP TMS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDAP TMS SA 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 EDAP TMS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDAP TMS SA has no effect on the direction of West Pharmaceutical i.e., West Pharmaceutical and EDAP TMS go up and down completely randomly.
Pair Corralation between West Pharmaceutical and EDAP TMS
Considering the 90-day investment horizon West Pharmaceutical Services is expected to generate 0.87 times more return on investment than EDAP TMS. However, West Pharmaceutical Services is 1.15 times less risky than EDAP TMS. It trades about 0.04 of its potential returns per unit of risk. EDAP TMS SA is currently generating about -0.11 per unit of risk. If you would invest 30,452 in West Pharmaceutical Services on September 4, 2024 and sell it today you would earn a total of 1,737 from holding West Pharmaceutical Services or generate 5.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
West Pharmaceutical Services vs. EDAP TMS SA
Performance |
| Timeline |
| West Pharmaceutical |
| EDAP TMS SA |
West Pharmaceutical and EDAP TMS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with West Pharmaceutical and EDAP TMS
The main advantage of trading using opposite West Pharmaceutical and EDAP TMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if West Pharmaceutical position performs unexpectedly, EDAP TMS 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 EDAP TMS will offset losses from the drop in EDAP TMS's long position.| West Pharmaceutical vs. Teleflex Incorporated | West Pharmaceutical vs. Alcon AG | West Pharmaceutical vs. ResMed Inc | West Pharmaceutical vs. ICU Medical |
| EDAP TMS vs. Baxter International | EDAP TMS vs. West Pharmaceutical Services | EDAP TMS vs. ResMed Inc | EDAP TMS vs. The Cooper Companies, |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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