Correlation Between West Pharmaceutical and Clearpoint Neuro

Can any of the company-specific risk be diversified away by investing in both West Pharmaceutical and Clearpoint Neuro 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 Clearpoint Neuro 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 Clearpoint Neuro, you can compare the effects of market volatilities on West Pharmaceutical and Clearpoint Neuro 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 Clearpoint Neuro. Check out your portfolio center. Please also check ongoing floating volatility patterns of West Pharmaceutical and Clearpoint Neuro.

Diversification Opportunities for West Pharmaceutical and Clearpoint Neuro

0.01

Correlation Coefficient

West Pharmaceutical  Clearpoint Neuro

Significant diversification

The 3 months correlation between West and Clearpoint is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding West Pharmaceutical Services and Clearpoint Neuro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearpoint Neuro 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 Clearpoint Neuro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearpoint Neuro has no effect on the direction of West Pharmaceutical i.e., West Pharmaceutical and Clearpoint Neuro go up and down completely randomly.

Pair Corralation between West Pharmaceutical and Clearpoint Neuro

Considering the 90-day investment horizon West Pharmaceutical is expected to generate 1.97 times less return on investment than Clearpoint Neuro. But when comparing it to its historical volatility, West Pharmaceutical Services is 2.04 times less risky than Clearpoint Neuro. It trades about 0.04 of its potential returns per unit of risk. Clearpoint Neuro is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  872.00  in Clearpoint Neuro on September 4, 2024 and sell it today you would earn a total of  328.00  from holding Clearpoint Neuro or generate 37.61% 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.  Clearpoint Neuro

West Pharmaceutical

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in West Pharmaceutical Services are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, West Pharmaceutical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Clearpoint Neuro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clearpoint Neuro has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Clearpoint Neuro is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with West Pharmaceutical and Clearpoint Neuro

The main advantage of trading using opposite West Pharmaceutical and Clearpoint Neuro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if West Pharmaceutical position performs unexpectedly, Clearpoint Neuro 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 Clearpoint Neuro will offset losses from the drop in Clearpoint Neuro's long position.

The idea behind West Pharmaceutical Services and Clearpoint Neuro pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.