Correlation Between Salesforce and Teva Pharmaceutical

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

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

Diversification Opportunities for Salesforce and Teva Pharmaceutical

0.48

Correlation Coefficient

Salesforce  Teva Pharmaceutical

Very weak diversification

The 3 months correlation between Salesforce and Teva is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Teva Pharmaceutical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teva Pharmaceutical and Salesforce 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 Salesforce 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 Salesforce i.e., Salesforce and Teva Pharmaceutical go up and down completely randomly.

Pair Corralation between Salesforce and Teva Pharmaceutical

Assuming the 90 days trading horizon Salesforce is expected to generate 0.66 times more return on investment than Teva Pharmaceutical. However, Salesforce is 1.52 times less risky than Teva Pharmaceutical. It trades about -0.18 of its potential returns per unit of risk. Teva Pharmaceutical Industries is currently generating about -0.2 per unit of risk. If you would invest  32,385  in Salesforce on December 24, 2024 and sell it today you would lose (6,550) from holding Salesforce or give up 20.23% of portfolio value over 90 days.

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

Salesforce  vs.  Teva Pharmaceutical Industries

Salesforce

Risk-Adjusted Performance

Very Weak

Over the last 90 days Salesforce has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile 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.

Teva Pharmaceutical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Teva Pharmaceutical Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain 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.

Pair Trading with Salesforce and Teva Pharmaceutical

The main advantage of trading using opposite Salesforce and Teva Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salesforce 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 Salesforce 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.