Correlation Between Teva Pharma and Traws Pharma

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

Diversification Opportunities for Teva Pharma and Traws Pharma

0.68

Correlation Coefficient

Teva Pharma  Traws Pharma

Poor diversification

The 3 months correlation between Teva and Traws is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Teva Pharma Industries and Traws Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Traws 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 Traws Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Traws Pharma has no effect on the direction of Teva Pharma i.e., Teva Pharma and Traws Pharma go up and down completely randomly.

Pair Corralation between Teva Pharma and Traws Pharma

Given the investment horizon of 90 days Teva Pharma Industries is expected to under-perform the Traws Pharma. But the stock apears to be less risky and, when comparing its historical volatility, Teva Pharma Industries is 7.42 times less risky than Traws Pharma. The stock trades about -0.13 of its potential returns per unit of risk. The Traws Pharma is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  533.00  in Traws Pharma on December 19, 2024 and sell it today you would lose (252.00) from holding Traws Pharma or give up 47.28% of portfolio value over 90 days.

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

Teva Pharma Industries  vs.  Traws Pharma

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.

Traws Pharma

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Traws Pharma are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Traws Pharma showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Teva Pharma and Traws Pharma

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

The idea behind Teva Pharma Industries and Traws 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.