Correlation Between West Pharmaceutical and Sanara Medtech

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

Diversification Opportunities for West Pharmaceutical and Sanara Medtech

0.12

Correlation Coefficient

West Pharmaceutical  Sanara Medtech

Average diversification

The 3 months correlation between West and Sanara is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding West Pharmaceutical Services and Sanara Medtech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanara Medtech 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 Sanara Medtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanara Medtech has no effect on the direction of West Pharmaceutical i.e., West Pharmaceutical and Sanara Medtech go up and down completely randomly.

Pair Corralation between West Pharmaceutical and Sanara Medtech

Considering the 90-day investment horizon West Pharmaceutical Services is expected to under-perform the Sanara Medtech. In addition to that, West Pharmaceutical is 1.62 times more volatile than Sanara Medtech. It trades about -0.09 of its total potential returns per unit of risk. Sanara Medtech is currently generating about -0.05 per unit of volatility. If you would invest  3,350  in Sanara Medtech on December 27, 2024 and sell it today you would lose (387.00) from holding Sanara Medtech or give up 11.55% of portfolio value over 90 days.

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

West Pharmaceutical Services  vs.  Sanara Medtech

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.

Sanara Medtech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sanara Medtech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with West Pharmaceutical and Sanara Medtech

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

The idea behind West Pharmaceutical Services and Sanara Medtech 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.