Correlation Between Teva Pharmaceutical and CITY OFFICE

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

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

Diversification Opportunities for Teva Pharmaceutical and CITY OFFICE

0.45

Correlation Coefficient

Teva Pharmaceutical  CITY OFFICE

Very weak diversification

The 3 months correlation between Teva and CITY is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Teva Pharmaceutical Industries and CITY OFFICE REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITY OFFICE REIT and Teva Pharmaceutical 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 Teva Pharmaceutical Industries are associated (or correlated) with CITY OFFICE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITY OFFICE REIT has no effect on the direction of Teva Pharmaceutical i.e., Teva Pharmaceutical and CITY OFFICE go up and down completely randomly.

Pair Corralation between Teva Pharmaceutical and CITY OFFICE

Assuming the 90 days horizon Teva Pharmaceutical Industries is expected to under-perform the CITY OFFICE. In addition to that, Teva Pharmaceutical is 1.34 times more volatile than CITY OFFICE REIT. It trades about -0.17 of its total potential returns per unit of risk. CITY OFFICE REIT is currently generating about -0.04 per unit of volatility. If you would invest  495.00  in CITY OFFICE REIT on December 20, 2024 and sell it today you would lose (35.00) from holding CITY OFFICE REIT or give up 7.07% of portfolio value over 90 days.

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

Teva Pharmaceutical Industries  vs.  CITY OFFICE REIT

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

CITY OFFICE REIT

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Teva Pharmaceutical and CITY OFFICE

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

The idea behind Teva Pharmaceutical Industries and CITY OFFICE REIT 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.