Correlation Between West Pharmaceutical and Lucid Diagnostics
Can any of the company-specific risk be diversified away by investing in both West Pharmaceutical and Lucid Diagnostics 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 Lucid Diagnostics 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 Lucid Diagnostics, you can compare the effects of market volatilities on West Pharmaceutical and Lucid Diagnostics 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 Lucid Diagnostics. Check out your portfolio center. Please also check ongoing floating volatility patterns of West Pharmaceutical and Lucid Diagnostics.
Diversification Opportunities for West Pharmaceutical and Lucid Diagnostics
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between West and Lucid is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding West Pharmaceutical Services and Lucid Diagnostics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lucid Diagnostics 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 Lucid Diagnostics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lucid Diagnostics has no effect on the direction of West Pharmaceutical i.e., West Pharmaceutical and Lucid Diagnostics go up and down completely randomly.
Pair Corralation between West Pharmaceutical and Lucid Diagnostics
Considering the 90-day investment horizon West Pharmaceutical Services is expected to generate 0.7 times more return on investment than Lucid Diagnostics. However, West Pharmaceutical Services is 1.43 times less risky than Lucid Diagnostics. It trades about 0.06 of its potential returns per unit of risk. Lucid Diagnostics is currently generating about -0.07 per unit of risk. If you would invest 31,457 in West Pharmaceutical Services on September 5, 2024 and sell it today you would earn a total of 732.00 from holding West Pharmaceutical Services or generate 2.33% 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. Lucid Diagnostics
Performance |
| Timeline |
| West Pharmaceutical |
| Lucid Diagnostics |
West Pharmaceutical and Lucid Diagnostics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with West Pharmaceutical and Lucid Diagnostics
The main advantage of trading using opposite West Pharmaceutical and Lucid Diagnostics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if West Pharmaceutical position performs unexpectedly, Lucid Diagnostics 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 Lucid Diagnostics will offset losses from the drop in Lucid Diagnostics' long position.| West Pharmaceutical vs. Teleflex Incorporated | West Pharmaceutical vs. Alcon AG | West Pharmaceutical vs. ResMed Inc | West Pharmaceutical vs. ICU Medical |
| Lucid Diagnostics vs. Baxter International | Lucid Diagnostics vs. West Pharmaceutical Services | Lucid Diagnostics vs. ResMed Inc | Lucid Diagnostics vs. ICU Medical |
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 Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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