Correlation Between Columbia Sportswear and Teva Pharmaceutical

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

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

Diversification Opportunities for Columbia Sportswear and Teva Pharmaceutical

0.36

Correlation Coefficient

Columbia Sportswear  Teva Pharmaceutical

Weak diversification

The 3 months correlation between Columbia and Teva is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Sportswear and Teva Pharmaceutical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teva Pharmaceutical and Columbia Sportswear 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 Columbia Sportswear are associated (or correlated) with Teva Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teva Pharmaceutical has no effect on the direction of Columbia Sportswear i.e., Columbia Sportswear and Teva Pharmaceutical go up and down completely randomly.

Pair Corralation between Columbia Sportswear and Teva Pharmaceutical

Assuming the 90 days horizon Columbia Sportswear is expected to under-perform the Teva Pharmaceutical. But the stock apears to be less risky and, when comparing its historical volatility, Columbia Sportswear is 5.23 times less risky than Teva Pharmaceutical. The stock trades about -0.2 of its potential returns per unit of risk. The Teva Pharmaceutical Industries is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,665  in Teva Pharmaceutical Industries on October 8, 2024 and sell it today you would earn a total of  335.00  from holding Teva Pharmaceutical Industries or generate 20.12% return on investment over 90 days.

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

Columbia Sportswear  vs.  Teva Pharmaceutical Industries

Columbia Sportswear

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Sportswear are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Columbia Sportswear may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Teva Pharmaceutical

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Teva Pharmaceutical Industries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Teva Pharmaceutical reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Columbia Sportswear and Teva Pharmaceutical

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

The idea behind Columbia Sportswear and Teva Pharmaceutical 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.