Correlation Between BC Bud and Teva Pharma

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

By analyzing existing cross correlation between The BC Bud and Teva Pharma Industries, you can compare the effects of market volatilities on BC Bud and Teva Pharma 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 BC Bud with a short position of Teva Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of BC Bud and Teva Pharma.

Diversification Opportunities for BC Bud and Teva Pharma

0.31

Correlation Coefficient

BC Bud  Teva Pharma

Weak diversification

The 3 months correlation between BCBCF and Teva is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding The BC Bud and Teva Pharma Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teva Pharma Industries and BC Bud 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 The BC Bud are associated (or correlated) with Teva Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teva Pharma Industries has no effect on the direction of BC Bud i.e., BC Bud and Teva Pharma go up and down completely randomly.

Pair Corralation between BC Bud and Teva Pharma

Assuming the 90 days horizon The BC Bud is expected to generate 8.98 times more return on investment than Teva Pharma. However, BC Bud is 8.98 times more volatile than Teva Pharma Industries. It trades about 0.05 of its potential returns per unit of risk. Teva Pharma Industries is currently generating about 0.06 per unit of risk. If you would invest  6.34  in The BC Bud on October 8, 2024 and sell it today you would earn a total of  0.33  from holding The BC Bud or generate 5.21% return on investment over 90 days.

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

The BC Bud  vs.  Teva Pharma Industries

BC Bud

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The BC Bud are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, BC Bud reported solid returns over the last few months and may actually be approaching a breakup point.

Teva Pharma Industries

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Teva Pharma Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Teva Pharma sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BC Bud and Teva Pharma

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

The idea behind The BC Bud and Teva Pharma Industries 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.