Correlation Between West Pharmaceutical and Globus Medical
Can any of the company-specific risk be diversified away by investing in both West Pharmaceutical and Globus Medical 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 Globus Medical 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 Globus Medical, you can compare the effects of market volatilities on West Pharmaceutical and Globus Medical 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 Globus Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of West Pharmaceutical and Globus Medical.
Diversification Opportunities for West Pharmaceutical and Globus Medical
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between West and Globus is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding West Pharmaceutical Services and Globus Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globus Medical 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 Globus Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globus Medical has no effect on the direction of West Pharmaceutical i.e., West Pharmaceutical and Globus Medical go up and down completely randomly.
Pair Corralation between West Pharmaceutical and Globus Medical
Considering the 90-day investment horizon West Pharmaceutical is expected to generate 4.67 times less return on investment than Globus Medical. In addition to that, West Pharmaceutical is 1.05 times more volatile than Globus Medical. It trades about 0.06 of its total potential returns per unit of risk. Globus Medical is currently generating about 0.27 per unit of volatility. If you would invest 7,472 in Globus Medical on September 5, 2024 and sell it today you would earn a total of 1,038 from holding Globus Medical or generate 13.89% 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. Globus Medical
Performance |
| Timeline |
| West Pharmaceutical |
| Globus Medical |
West Pharmaceutical and Globus Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with West Pharmaceutical and Globus Medical
The main advantage of trading using opposite West Pharmaceutical and Globus Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if West Pharmaceutical position performs unexpectedly, Globus Medical 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 Globus Medical will offset losses from the drop in Globus Medical's long position.| West Pharmaceutical vs. Teleflex Incorporated | West Pharmaceutical vs. Alcon AG | West Pharmaceutical vs. ResMed Inc | West Pharmaceutical vs. ICU Medical |
| Globus Medical vs. Orthofix Medical | Globus Medical vs. CONMED | Globus Medical vs. Alphatec Holdings | Globus Medical vs. LivaNova PLC |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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