Correlation Between Catalent and Teva Pharma

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

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

Diversification Opportunities for Catalent and Teva Pharma

-0.3

Correlation Coefficient

Catalent  Teva Pharma

Very good diversification

The 3 months correlation between Catalent and Teva is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Catalent 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 Catalent 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 Catalent 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 Catalent i.e., Catalent and Teva Pharma go up and down completely randomly.

Pair Corralation between Catalent and Teva Pharma

Given the investment horizon of 90 days Catalent is expected to generate 0.33 times more return on investment than Teva Pharma. However, Catalent is 3.0 times less risky than Teva Pharma. It trades about 0.12 of its potential returns per unit of risk. Teva Pharma Industries is currently generating about -0.08 per unit of risk. If you would invest  6,016  in Catalent on September 14, 2024 and sell it today you would earn a total of  291.00  from holding Catalent or generate 4.84% return on investment over 90 days.

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

Catalent  vs.  Teva Pharma Industries

Catalent

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Catalent is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Teva Pharma Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teva Pharma Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Catalent and Teva Pharma

The main advantage of trading using opposite Catalent and Teva Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Catalent 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 Catalent 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.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.