Correlation Between Microbot Medical and West Pharmaceutical

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

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

Diversification Opportunities for Microbot Medical and West Pharmaceutical

0.01

Correlation Coefficient

Microbot Medical  West Pharmaceutical

Significant diversification

The 3 months correlation between Microbot and West is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Microbot Medical and West Pharmaceutical Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Pharmaceutical and Microbot Medical 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 Microbot Medical 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 Microbot Medical i.e., Microbot Medical and West Pharmaceutical go up and down completely randomly.

Pair Corralation between Microbot Medical and West Pharmaceutical

Given the investment horizon of 90 days Microbot Medical is expected to generate 1.05 times more return on investment than West Pharmaceutical. However, Microbot Medical is 1.05 times more volatile than West Pharmaceutical Services. It trades about 0.07 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  87.00  in Microbot Medical on August 31, 2024 and sell it today you would earn a total of  10.00  from holding Microbot Medical or generate 11.49% return on investment over 90 days.

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

Microbot Medical  vs.  West Pharmaceutical Services

Microbot Medical

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Microbot Medical are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Microbot Medical unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 December 2024.

Pair Trading with Microbot Medical and West Pharmaceutical

The main advantage of trading using opposite Microbot Medical and West Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microbot Medical 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 Microbot Medical 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.