Correlation Between Repligen and West Pharmaceutical

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

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

Diversification Opportunities for Repligen and West Pharmaceutical

0.37

Correlation Coefficient

Repligen  West Pharmaceutical

Weak diversification

The 3 months correlation between Repligen and West is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Repligen and West Pharmaceutical Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Pharmaceutical and Repligen 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 Repligen 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 Repligen i.e., Repligen and West Pharmaceutical go up and down completely randomly.

Pair Corralation between Repligen and West Pharmaceutical

Given the investment horizon of 90 days Repligen is expected to generate 0.6 times more return on investment than West Pharmaceutical. However, Repligen is 1.68 times less risky than West Pharmaceutical. It trades about -0.01 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  14,381  in Repligen on December 28, 2024 and sell it today you would lose (669.00) from holding Repligen or give up 4.65% of portfolio value over 90 days.

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

Repligen  vs.  West Pharmaceutical Services

Repligen

Risk-Adjusted Performance

Very Weak

Over the last 90 days Repligen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Repligen is not utilizing all of its potentials. The current stock price disarray, 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 Repligen and West Pharmaceutical

The main advantage of trading using opposite Repligen and West Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Repligen 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 Repligen 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.