Correlation Between West Pharmaceutical and Repligen

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

Diversification Opportunities for West Pharmaceutical and Repligen

0.37

Correlation Coefficient

West Pharmaceutical  Repligen

Weak diversification

The 3 months correlation between West and Repligen is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding West Pharmaceutical Services and Repligen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Repligen 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 Repligen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Repligen has no effect on the direction of West Pharmaceutical i.e., West Pharmaceutical and Repligen go up and down completely randomly.

Pair Corralation between West Pharmaceutical and Repligen

Considering the 90-day investment horizon West Pharmaceutical Services is expected to under-perform the Repligen. In addition to that, West Pharmaceutical is 1.68 times more volatile than Repligen. It trades about -0.09 of its total potential returns per unit of risk. Repligen is currently generating about -0.01 per unit of volatility. 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

West Pharmaceutical Services  vs.  Repligen

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.

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.

Pair Trading with West Pharmaceutical and Repligen

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

The idea behind West Pharmaceutical Services and Repligen 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.