Correlation Between West Pharmaceutical and Teleflex Incorporated

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

Diversification Opportunities for West Pharmaceutical and Teleflex Incorporated

0.73

Correlation Coefficient

West Pharmaceutical  Teleflex Incorporated

Poor diversification

The 3 months correlation between West and Teleflex is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding West Pharmaceutical Services and Teleflex Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teleflex Incorporated 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 Teleflex Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teleflex Incorporated has no effect on the direction of West Pharmaceutical i.e., West Pharmaceutical and Teleflex Incorporated go up and down completely randomly.

Pair Corralation between West Pharmaceutical and Teleflex Incorporated

Considering the 90-day investment horizon West Pharmaceutical Services is expected to under-perform the Teleflex Incorporated. In addition to that, West Pharmaceutical is 1.69 times more volatile than Teleflex Incorporated. It trades about -0.08 of its total potential returns per unit of risk. Teleflex Incorporated is currently generating about -0.11 per unit of volatility. If you would invest  17,661  in Teleflex Incorporated on December 28, 2024 and sell it today you would lose (3,724) from holding Teleflex Incorporated or give up 21.09% of portfolio value over 90 days.

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

West Pharmaceutical Services  vs.  Teleflex Incorporated

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.

Teleflex Incorporated

Risk-Adjusted Performance

Very Weak

Over the last 90 days Teleflex Incorporated 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 technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with West Pharmaceutical and Teleflex Incorporated

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

The idea behind West Pharmaceutical Services and Teleflex Incorporated 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.