Correlation Between West Pharmaceutical and ResMed
Can any of the company-specific risk be diversified away by investing in both West Pharmaceutical and ResMed 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 ResMed 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 ResMed Inc, you can compare the effects of market volatilities on West Pharmaceutical and ResMed 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 ResMed. Check out your portfolio center. Please also check ongoing floating volatility patterns of West Pharmaceutical and ResMed.
Diversification Opportunities for West Pharmaceutical and ResMed
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between West and ResMed is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding West Pharmaceutical Services and ResMed Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ResMed Inc 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 ResMed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ResMed Inc has no effect on the direction of West Pharmaceutical i.e., West Pharmaceutical and ResMed go up and down completely randomly.
Pair Corralation between West Pharmaceutical and ResMed
Considering the 90-day investment horizon West Pharmaceutical Services is expected to generate 1.66 times more return on investment than ResMed. However, West Pharmaceutical is 1.66 times more volatile than ResMed Inc. It trades about 0.07 of its potential returns per unit of risk. ResMed Inc is currently generating about 0.05 per unit of risk. If you would invest 31,021 in West Pharmaceutical Services on August 28, 2024 and sell it today you would earn a total of 958.00 from holding West Pharmaceutical Services or generate 3.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
West Pharmaceutical Services vs. ResMed Inc
Performance |
| Timeline |
| West Pharmaceutical |
| ResMed Inc |
West Pharmaceutical and ResMed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with West Pharmaceutical and ResMed
The main advantage of trading using opposite West Pharmaceutical and ResMed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if West Pharmaceutical position performs unexpectedly, ResMed 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 ResMed will offset losses from the drop in ResMed's long position.| West Pharmaceutical vs. Teleflex Incorporated | West Pharmaceutical vs. Alcon AG | West Pharmaceutical vs. ResMed Inc | West Pharmaceutical vs. ICU Medical |
| ResMed vs. Teleflex Incorporated | ResMed vs. West Pharmaceutical Services | ResMed vs. Alcon AG | ResMed 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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