Correlation Between Teva Pharma and US Lithium

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

Diversification Opportunities for Teva Pharma and US Lithium

-0.9

Correlation Coefficient

Teva Pharma  US Lithium

Pay attention - limited upside

The 3 months correlation between Teva and LITH is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Teva Pharma Industries and US Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Lithium Corp 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 US Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Lithium Corp has no effect on the direction of Teva Pharma i.e., Teva Pharma and US Lithium go up and down completely randomly.

Pair Corralation between Teva Pharma and US Lithium

If you would invest  0.01  in US Lithium Corp on October 25, 2024 and sell it today you would earn a total of  0.00  from holding US Lithium Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	90.0%
Values	Daily Returns

Teva Pharma Industries  vs.  US Lithium Corp

Teva Pharma Industries

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Teva Pharma Industries are ranked lower than 8 (%) 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.

US Lithium Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US Lithium Corp 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 fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Teva Pharma and US Lithium

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

The idea behind Teva Pharma Industries and US Lithium Corp 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 Commodity Directory module to find actively traded commodities issued by global exchanges.