Correlation Between Haemonetics and West Pharmaceutical

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

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

Diversification Opportunities for Haemonetics and West Pharmaceutical

0.6

Correlation Coefficient

Haemonetics  West Pharmaceutical

Poor diversification

The 3 months correlation between Haemonetics and West is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Haemonetics and West Pharmaceutical Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Pharmaceutical and Haemonetics 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 Haemonetics 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 Haemonetics i.e., Haemonetics and West Pharmaceutical go up and down completely randomly.

Pair Corralation between Haemonetics and West Pharmaceutical

Considering the 90-day investment horizon Haemonetics is expected to generate 0.78 times more return on investment than West Pharmaceutical. However, Haemonetics is 1.28 times less risky than West Pharmaceutical. It trades about 0.12 of its potential returns per unit of risk. West Pharmaceutical Services is currently generating about 0.05 per unit of risk. If you would invest  7,507  in Haemonetics on September 1, 2024 and sell it today you would earn a total of  1,240  from holding Haemonetics or generate 16.52% return on investment over 90 days.

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

Haemonetics  vs.  West Pharmaceutical Services

Haemonetics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Haemonetics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Haemonetics exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 December 2024.

Pair Trading with Haemonetics and West Pharmaceutical

The main advantage of trading using opposite Haemonetics and West Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Haemonetics 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 Haemonetics 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.