Correlation Between West Pharmaceutical and Sonida Senior
Can any of the company-specific risk be diversified away by investing in both West Pharmaceutical and Sonida Senior 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 Sonida Senior 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 Sonida Senior Living, you can compare the effects of market volatilities on West Pharmaceutical and Sonida Senior 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 Sonida Senior. Check out your portfolio center. Please also check ongoing floating volatility patterns of West Pharmaceutical and Sonida Senior.
Diversification Opportunities for West Pharmaceutical and Sonida Senior
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between West and Sonida is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding West Pharmaceutical Services and Sonida Senior Living in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonida Senior Living 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 Sonida Senior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonida Senior Living has no effect on the direction of West Pharmaceutical i.e., West Pharmaceutical and Sonida Senior go up and down completely randomly.
Pair Corralation between West Pharmaceutical and Sonida Senior
Considering the 90-day investment horizon West Pharmaceutical Services is expected to under-perform the Sonida Senior. But the stock apears to be less risky and, when comparing its historical volatility, West Pharmaceutical Services is 1.25 times less risky than Sonida Senior. The stock trades about -0.04 of its potential returns per unit of risk. The Sonida Senior Living is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,476 in Sonida Senior Living on September 12, 2024 and sell it today you would earn a total of 66.00 from holding Sonida Senior Living or generate 2.67% 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. Sonida Senior Living
Performance |
| Timeline |
| West Pharmaceutical |
| Sonida Senior Living |
West Pharmaceutical and Sonida Senior Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with West Pharmaceutical and Sonida Senior
The main advantage of trading using opposite West Pharmaceutical and Sonida Senior positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if West Pharmaceutical position performs unexpectedly, Sonida Senior 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 Sonida Senior will offset losses from the drop in Sonida Senior's long position.| West Pharmaceutical vs. Teleflex Incorporated | West Pharmaceutical vs. Alcon AG | West Pharmaceutical vs. ResMed Inc | West Pharmaceutical vs. ICU Medical |
| Sonida Senior vs. Select Medical Holdings | Sonida Senior vs. Encompass Health Corp | Sonida Senior vs. Pennant Group | Sonida Senior vs. InnovAge Holding 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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