Correlation Between Teva Pharma and AstraZeneca PLC

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

Diversification Opportunities for Teva Pharma and AstraZeneca PLC

-0.14

Correlation Coefficient

Teva Pharma  AstraZeneca PLC

Good diversification

The 3 months correlation between Teva and AstraZeneca is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Teva Pharma Industries and AstraZeneca PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC ADR 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 AstraZeneca PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AstraZeneca PLC ADR has no effect on the direction of Teva Pharma i.e., Teva Pharma and AstraZeneca PLC go up and down completely randomly.

Pair Corralation between Teva Pharma and AstraZeneca PLC

Given the investment horizon of 90 days Teva Pharma is expected to generate 1.05 times less return on investment than AstraZeneca PLC. In addition to that, Teva Pharma is 2.22 times more volatile than AstraZeneca PLC ADR. It trades about 0.08 of its total potential returns per unit of risk. AstraZeneca PLC ADR is currently generating about 0.18 per unit of volatility. If you would invest  6,444  in AstraZeneca PLC ADR on October 20, 2024 and sell it today you would earn a total of  216.00  from holding AstraZeneca PLC ADR or generate 3.35% return on investment over 90 days.

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

Teva Pharma Industries  vs.  AstraZeneca PLC ADR

Teva Pharma Industries

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Teva Pharma Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Teva Pharma sustained solid returns over the last few months and may actually be approaching a breakup point.

AstraZeneca PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AstraZeneca PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Teva Pharma and AstraZeneca PLC

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

The idea behind Teva Pharma Industries and AstraZeneca PLC ADR 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.