Correlation Between Teva Pharmaceutical and CARSALESCOM

Can any of the company-specific risk be diversified away by investing in both Teva Pharmaceutical and CARSALESCOM 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 CARSALESCOM 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 CARSALESCOM, you can compare the effects of market volatilities on Teva Pharmaceutical and CARSALESCOM 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 CARSALESCOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teva Pharmaceutical and CARSALESCOM.

Diversification Opportunities for Teva Pharmaceutical and CARSALESCOM

-0.56

Correlation Coefficient

Teva Pharmaceutical  CARSALESCOM

Excellent diversification

The 3 months correlation between Teva and CARSALESCOM is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Teva Pharmaceutical Industries and CARSALESCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARSALESCOM 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 CARSALESCOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARSALESCOM has no effect on the direction of Teva Pharmaceutical i.e., Teva Pharmaceutical and CARSALESCOM go up and down completely randomly.

Pair Corralation between Teva Pharmaceutical and CARSALESCOM

Assuming the 90 days horizon Teva Pharmaceutical Industries is expected to generate 1.84 times more return on investment than CARSALESCOM. However, Teva Pharmaceutical is 1.84 times more volatile than CARSALESCOM. It trades about 0.06 of its potential returns per unit of risk. CARSALESCOM is currently generating about 0.08 per unit of risk. If you would invest  986.00  in Teva Pharmaceutical Industries on October 11, 2024 and sell it today you would earn a total of  1,084  from holding Teva Pharmaceutical Industries or generate 109.94% return on investment over 90 days.

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

Teva Pharmaceutical Industries  vs.  CARSALESCOM

Teva Pharmaceutical

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Teva Pharmaceutical Industries are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Teva Pharmaceutical reported solid returns over the last few months and may actually be approaching a breakup point.

CARSALESCOM

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CARSALESCOM are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, CARSALESCOM is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Teva Pharmaceutical and CARSALESCOM

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

The idea behind Teva Pharmaceutical Industries and CARSALESCOM 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.