Correlation Between West Pharmaceutical and Stereotaxis

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

Diversification Opportunities for West Pharmaceutical and Stereotaxis

0.23

Correlation Coefficient

West Pharmaceutical  Stereotaxis

Modest diversification

The 3 months correlation between West and Stereotaxis is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding West Pharmaceutical Services and Stereotaxis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stereotaxis 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 Stereotaxis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stereotaxis has no effect on the direction of West Pharmaceutical i.e., West Pharmaceutical and Stereotaxis go up and down completely randomly.

Pair Corralation between West Pharmaceutical and Stereotaxis

Considering the 90-day investment horizon West Pharmaceutical is expected to generate 1.26 times less return on investment than Stereotaxis. But when comparing it to its historical volatility, West Pharmaceutical Services is 1.48 times less risky than Stereotaxis. It trades about 0.05 of its potential returns per unit of risk. Stereotaxis is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  224.00  in Stereotaxis on September 3, 2024 and sell it today you would earn a total of  15.00  from holding Stereotaxis or generate 6.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

West Pharmaceutical Services  vs.  Stereotaxis

West Pharmaceutical

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in West Pharmaceutical Services are ranked lower than 4 (%) 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.

Stereotaxis

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with West Pharmaceutical and Stereotaxis

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

The idea behind West Pharmaceutical Services and Stereotaxis 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..