Correlation Between Teva Pharma and Hepion Pharmaceuticals

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

Diversification Opportunities for Teva Pharma and Hepion Pharmaceuticals

0.83

Correlation Coefficient

Teva Pharma  Hepion Pharmaceuticals

Very poor diversification

The 3 months correlation between Teva and Hepion is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Teva Pharma Industries and Hepion Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hepion Pharmaceuticals 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 Hepion Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hepion Pharmaceuticals has no effect on the direction of Teva Pharma i.e., Teva Pharma and Hepion Pharmaceuticals go up and down completely randomly.

Pair Corralation between Teva Pharma and Hepion Pharmaceuticals

Given the investment horizon of 90 days Teva Pharma Industries is expected to generate 0.18 times more return on investment than Hepion Pharmaceuticals. However, Teva Pharma Industries is 5.63 times less risky than Hepion Pharmaceuticals. It trades about -0.2 of its potential returns per unit of risk. Hepion Pharmaceuticals is currently generating about -0.27 per unit of risk. If you would invest  2,262  in Teva Pharma Industries on December 26, 2024 and sell it today you would lose (693.00) from holding Teva Pharma Industries or give up 30.64% of portfolio value over 90 days.

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

Teva Pharma Industries  vs.  Hepion Pharmaceuticals

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.

Hepion Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hepion Pharmaceuticals 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.

Pair Trading with Teva Pharma and Hepion Pharmaceuticals

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

The idea behind Teva Pharma Industries and Hepion Pharmaceuticals 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.