Correlation Between West Pharmaceutical and Femasys

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

Diversification Opportunities for West Pharmaceutical and Femasys

-0.22

Correlation Coefficient

West Pharmaceutical  Femasys

Very good diversification

The 3 months correlation between West and Femasys is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding West Pharmaceutical Services and Femasys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Femasys 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 Femasys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Femasys has no effect on the direction of West Pharmaceutical i.e., West Pharmaceutical and Femasys go up and down completely randomly.

Pair Corralation between West Pharmaceutical and Femasys

Considering the 90-day investment horizon West Pharmaceutical Services is expected to generate 0.49 times more return on investment than Femasys. However, West Pharmaceutical Services is 2.02 times less risky than Femasys. It trades about 0.06 of its potential returns per unit of risk. Femasys is currently generating about -0.04 per unit of risk. If you would invest  31,457  in West Pharmaceutical Services on September 4, 2024 and sell it today you would earn a total of  732.00  from holding West Pharmaceutical Services or generate 2.33% return on investment over 90 days.

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

West Pharmaceutical Services  vs.  Femasys

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 January 2025.

Femasys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Femasys has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Femasys is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with West Pharmaceutical and Femasys

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

The idea behind West Pharmaceutical Services and Femasys 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.