Correlation Between Teva Pharma and Aion Therapeutic

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

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

Diversification Opportunities for Teva Pharma and Aion Therapeutic

0.54

Correlation Coefficient

Teva Pharma  Aion Therapeutic

Very weak diversification

The 3 months correlation between Teva and Aion is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Teva Pharma Industries and Aion Therapeutic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aion Therapeutic and Teva Pharma 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 Pharma Industries are associated (or correlated) with Aion Therapeutic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aion Therapeutic has no effect on the direction of Teva Pharma i.e., Teva Pharma and Aion Therapeutic go up and down completely randomly.

Pair Corralation between Teva Pharma and Aion Therapeutic

Given the investment horizon of 90 days Teva Pharma Industries is expected to under-perform the Aion Therapeutic. But the stock apears to be less risky and, when comparing its historical volatility, Teva Pharma Industries is 22.72 times less risky than Aion Therapeutic. The stock trades about -0.13 of its potential returns per unit of risk. The Aion Therapeutic is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  0.41  in Aion Therapeutic on December 19, 2024 and sell it today you would earn a total of  0.14  from holding Aion Therapeutic or generate 34.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.77%
Values	Daily Returns

Teva Pharma Industries  vs.  Aion Therapeutic

Teva Pharma Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Teva Pharma Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating 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.

Aion Therapeutic

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aion Therapeutic are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Aion Therapeutic reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Teva Pharma and Aion Therapeutic

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

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