Correlation Between West Pharmaceutical and Haemonetics
Can any of the company-specific risk be diversified away by investing in both West Pharmaceutical and Haemonetics 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 Haemonetics 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 Haemonetics, you can compare the effects of market volatilities on West Pharmaceutical and Haemonetics 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 Haemonetics. Check out your portfolio center. Please also check ongoing floating volatility patterns of West Pharmaceutical and Haemonetics.
Diversification Opportunities for West Pharmaceutical and Haemonetics
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between West and Haemonetics is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding West Pharmaceutical Services and Haemonetics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haemonetics 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 Haemonetics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haemonetics has no effect on the direction of West Pharmaceutical i.e., West Pharmaceutical and Haemonetics go up and down completely randomly.
Pair Corralation between West Pharmaceutical and Haemonetics
Considering the 90-day investment horizon West Pharmaceutical Services is expected to generate 1.56 times more return on investment than Haemonetics. However, West Pharmaceutical is 1.56 times more volatile than Haemonetics. It trades about -0.03 of its potential returns per unit of risk. Haemonetics is currently generating about -0.06 per unit of risk. If you would invest 35,372 in West Pharmaceutical Services on December 24, 2024 and sell it today you would lose (12,256) from holding West Pharmaceutical Services or give up 34.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
West Pharmaceutical Services vs. Haemonetics
Performance |
| Timeline |
| West Pharmaceutical |
| Haemonetics |
West Pharmaceutical and Haemonetics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with West Pharmaceutical and Haemonetics
The main advantage of trading using opposite West Pharmaceutical and Haemonetics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if West Pharmaceutical position performs unexpectedly, Haemonetics 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 Haemonetics will offset losses from the drop in Haemonetics' long position.| West Pharmaceutical vs. Teleflex Incorporated | West Pharmaceutical vs. Alcon AG | West Pharmaceutical vs. ResMed Inc | West Pharmaceutical vs. ICU Medical |
| Haemonetics vs. Merit Medical Systems | Haemonetics vs. AngioDynamics | Haemonetics vs. AptarGroup | Haemonetics vs. Envista Holdings Corp |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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