Correlation Between Teva Pharma and Esperion Therapeutics

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

Diversification Opportunities for Teva Pharma and Esperion Therapeutics

0.91

Correlation Coefficient

Teva Pharma  Esperion Therapeutics

Almost no diversification

The 3 months correlation between Teva and Esperion is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Teva Pharma Industries and Esperion Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Esperion Therapeutics 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 Esperion Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Esperion Therapeutics has no effect on the direction of Teva Pharma i.e., Teva Pharma and Esperion Therapeutics go up and down completely randomly.

Pair Corralation between Teva Pharma and Esperion Therapeutics

Given the investment horizon of 90 days Teva Pharma Industries is expected to under-perform the Esperion Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Teva Pharma Industries is 1.29 times less risky than Esperion Therapeutics. The stock trades about -0.21 of its potential returns per unit of risk. The Esperion Therapeutics is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  215.00  in Esperion Therapeutics on December 28, 2024 and sell it today you would lose (65.00) from holding Esperion Therapeutics or give up 30.23% of portfolio value over 90 days.

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

Teva Pharma Industries  vs.  Esperion Therapeutics

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.

Esperion Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Esperion Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Teva Pharma and Esperion Therapeutics

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

The idea behind Teva Pharma Industries and Esperion Therapeutics 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.