Correlation Between Tradegate and Teva Pharmaceutical

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

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

Diversification Opportunities for Tradegate and Teva Pharmaceutical

0.72

Correlation Coefficient

Tradegate  Teva Pharmaceutical

Poor diversification

The 3 months correlation between Tradegate and Teva is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Tradegate AG Wertpapierhandels and Teva Pharmaceutical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teva Pharmaceutical and Tradegate 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 Tradegate AG Wertpapierhandelsbank 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 Tradegate i.e., Tradegate and Teva Pharmaceutical go up and down completely randomly.

Pair Corralation between Tradegate and Teva Pharmaceutical

Assuming the 90 days horizon Tradegate AG Wertpapierhandelsbank is expected to generate 0.09 times more return on investment than Teva Pharmaceutical. However, Tradegate AG Wertpapierhandelsbank is 10.7 times less risky than Teva Pharmaceutical. It trades about -0.07 of its potential returns per unit of risk. Teva Pharmaceutical Industries is currently generating about -0.18 per unit of risk. If you would invest  8,850  in Tradegate AG Wertpapierhandelsbank on December 21, 2024 and sell it today you would lose (100.00) from holding Tradegate AG Wertpapierhandelsbank or give up 1.13% of portfolio value over 90 days.

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

Tradegate AG Wertpapierhandels  vs.  Teva Pharmaceutical Industries

Tradegate AG Wertpap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tradegate AG Wertpapierhandelsbank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Tradegate is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 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.

Pair Trading with Tradegate and Teva Pharmaceutical

The main advantage of trading using opposite Tradegate and Teva Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tradegate 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 Tradegate AG Wertpapierhandelsbank 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.