Correlation Between Teva Pharma and Cocrystal Pharma

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

Diversification Opportunities for Teva Pharma and Cocrystal Pharma

0.32

Correlation Coefficient

Teva Pharma  Cocrystal Pharma

Weak diversification

The 3 months correlation between Teva and Cocrystal is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Teva Pharma Industries and Cocrystal Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cocrystal Pharma 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 Cocrystal Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cocrystal Pharma has no effect on the direction of Teva Pharma i.e., Teva Pharma and Cocrystal Pharma go up and down completely randomly.

Pair Corralation between Teva Pharma and Cocrystal Pharma

Given the investment horizon of 90 days Teva Pharma Industries is expected to generate 1.14 times more return on investment than Cocrystal Pharma. However, Teva Pharma is 1.14 times more volatile than Cocrystal Pharma. It trades about 0.26 of its potential returns per unit of risk. Cocrystal Pharma is currently generating about 0.22 per unit of risk. If you would invest  1,669  in Teva Pharma Industries on September 25, 2024 and sell it today you would earn a total of  552.00  from holding Teva Pharma Industries or generate 33.07% return on investment over 90 days.

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

Teva Pharma Industries  vs.  Cocrystal Pharma

Teva Pharma Industries

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Teva Pharma Industries are ranked lower than 9 (%) 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.

Cocrystal Pharma

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cocrystal Pharma are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental indicators, Cocrystal Pharma reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Teva Pharma and Cocrystal Pharma

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

The idea behind Teva Pharma Industries and Cocrystal Pharma 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..