Correlation Between West Pharmaceutical and Sharps Technology
Can any of the company-specific risk be diversified away by investing in both West Pharmaceutical and Sharps Technology 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 Sharps Technology 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 Sharps Technology, you can compare the effects of market volatilities on West Pharmaceutical and Sharps Technology 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 Sharps Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of West Pharmaceutical and Sharps Technology.
Diversification Opportunities for West Pharmaceutical and Sharps Technology
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between West and Sharps is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding West Pharmaceutical Services and Sharps Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sharps Technology 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 Sharps Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sharps Technology has no effect on the direction of West Pharmaceutical i.e., West Pharmaceutical and Sharps Technology go up and down completely randomly.
Pair Corralation between West Pharmaceutical and Sharps Technology
Considering the 90-day investment horizon West Pharmaceutical Services is expected to generate 0.24 times more return on investment than Sharps Technology. However, West Pharmaceutical Services is 4.22 times less risky than Sharps Technology. It trades about 0.06 of its potential returns per unit of risk. Sharps Technology is currently generating about -0.09 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 Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
West Pharmaceutical Services vs. Sharps Technology
Performance |
Timeline |
West Pharmaceutical |
Sharps Technology |
West Pharmaceutical and Sharps Technology Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with West Pharmaceutical and Sharps Technology
The main advantage of trading using opposite West Pharmaceutical and Sharps Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if West Pharmaceutical position performs unexpectedly, Sharps Technology 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 Sharps Technology will offset losses from the drop in Sharps Technology's long position.West Pharmaceutical vs. Teleflex Incorporated | West Pharmaceutical vs. Alcon AG | West Pharmaceutical vs. ResMed Inc | West Pharmaceutical vs. ICU Medical |
Sharps Technology vs. Baxter International | Sharps Technology vs. West Pharmaceutical Services | Sharps Technology vs. ResMed Inc | Sharps Technology 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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