Correlation Between Teva Pharma and Haleon Plc

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

Diversification Opportunities for Teva Pharma and Haleon Plc

-0.5

Correlation Coefficient

Teva Pharma  Haleon Plc

Very good diversification

The 3 months correlation between Teva and Haleon is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Teva Pharma Industries and Haleon plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haleon plc 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 Haleon Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haleon plc has no effect on the direction of Teva Pharma i.e., Teva Pharma and Haleon Plc go up and down completely randomly.

Pair Corralation between Teva Pharma and Haleon Plc

Given the investment horizon of 90 days Teva Pharma is expected to generate 1.3 times less return on investment than Haleon Plc. In addition to that, Teva Pharma is 3.95 times more volatile than Haleon plc. It trades about 0.02 of its total potential returns per unit of risk. Haleon plc is currently generating about 0.08 per unit of volatility. If you would invest  966.00  in Haleon plc on November 28, 2024 and sell it today you would earn a total of  49.00  from holding Haleon plc or generate 5.07% return on investment over 90 days.

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

Teva Pharma Industries  vs.  Haleon plc

Teva Pharma Industries

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Teva Pharma Industries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Teva Pharma is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Haleon plc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Haleon plc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Haleon Plc is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Teva Pharma and Haleon Plc

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

The idea behind Teva Pharma Industries and Haleon plc 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.