Correlation Between Becton Dickinson and West Pharmaceutical

Can any of the company-specific risk be diversified away by investing in both Becton Dickinson and West Pharmaceutical 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 Becton Dickinson and West Pharmaceutical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Becton Dickinson and and West Pharmaceutical Services, you can compare the effects of market volatilities on Becton Dickinson and West Pharmaceutical 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 Becton Dickinson with a short position of West Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Becton Dickinson and West Pharmaceutical.

Diversification Opportunities for Becton Dickinson and West Pharmaceutical

0.54

Correlation Coefficient

Becton Dickinson  West Pharmaceutical

Very weak diversification

The 3 months correlation between Becton and West is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Becton Dickinson and and West Pharmaceutical Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Pharmaceutical and Becton Dickinson 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 Becton Dickinson and are associated (or correlated) with West Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Pharmaceutical has no effect on the direction of Becton Dickinson i.e., Becton Dickinson and West Pharmaceutical go up and down completely randomly.

Pair Corralation between Becton Dickinson and West Pharmaceutical

Considering the 90-day investment horizon Becton Dickinson and is expected to generate 0.25 times more return on investment than West Pharmaceutical. However, Becton Dickinson and is 3.99 times less risky than West Pharmaceutical. It trades about 0.02 of its potential returns per unit of risk. West Pharmaceutical Services is currently generating about -0.09 per unit of risk. If you would invest  22,745  in Becton Dickinson and on December 27, 2024 and sell it today you would earn a total of  168.00  from holding Becton Dickinson and or generate 0.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Becton Dickinson and  vs.  West Pharmaceutical Services

Becton Dickinson

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Becton Dickinson and are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Becton Dickinson is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

West Pharmaceutical

Risk-Adjusted Performance

Very Weak

Over the last 90 days West Pharmaceutical Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Becton Dickinson and West Pharmaceutical

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

The idea behind Becton Dickinson and and West Pharmaceutical Services 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.