Correlation Between Teva Pharmaceutical and Matrix

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

Diversification Opportunities for Teva Pharmaceutical and Matrix

-0.64

Correlation Coefficient

Teva Pharmaceutical  Matrix

Excellent diversification

The 3 months correlation between Teva and Matrix is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Teva Pharmaceutical Industries and Matrix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matrix 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 Matrix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matrix has no effect on the direction of Teva Pharmaceutical i.e., Teva Pharmaceutical and Matrix go up and down completely randomly.

Pair Corralation between Teva Pharmaceutical and Matrix

Assuming the 90 days trading horizon Teva Pharmaceutical Industries is expected to under-perform the Matrix. In addition to that, Teva Pharmaceutical is 1.86 times more volatile than Matrix. It trades about -0.2 of its total potential returns per unit of risk. Matrix is currently generating about 0.08 per unit of volatility. If you would invest  829,090  in Matrix on December 29, 2024 and sell it today you would earn a total of  54,810  from holding Matrix or generate 6.61% return on investment over 90 days.

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

Teva Pharmaceutical Industries  vs.  Matrix

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Matrix

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Matrix are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Matrix may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Teva Pharmaceutical and Matrix

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

The idea behind Teva Pharmaceutical Industries and Matrix 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.