Correlation Between CARSALESCOM and Teva Pharmaceutical

Can any of the company-specific risk be diversified away by investing in both CARSALESCOM and Teva Pharmaceutical 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 CARSALESCOM and Teva Pharmaceutical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CARSALESCOM and Teva Pharmaceutical Industries, you can compare the effects of market volatilities on CARSALESCOM and Teva Pharmaceutical 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 CARSALESCOM with a short position of Teva Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of CARSALESCOM and Teva Pharmaceutical.

Diversification Opportunities for CARSALESCOM and Teva Pharmaceutical

-0.55

Correlation Coefficient

CARSALESCOM  Teva Pharmaceutical

Excellent diversification

The 3 months correlation between CARSALESCOM and Teva is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding CARSALESCOM and Teva Pharmaceutical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teva Pharmaceutical and CARSALESCOM 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 CARSALESCOM are associated (or correlated) with Teva Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teva Pharmaceutical has no effect on the direction of CARSALESCOM i.e., CARSALESCOM and Teva Pharmaceutical go up and down completely randomly.

Pair Corralation between CARSALESCOM and Teva Pharmaceutical

Assuming the 90 days trading horizon CARSALESCOM is expected to generate 12.6 times less return on investment than Teva Pharmaceutical. But when comparing it to its historical volatility, CARSALESCOM is 2.46 times less risky than Teva Pharmaceutical. It trades about 0.03 of its potential returns per unit of risk. Teva Pharmaceutical Industries is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,585  in Teva Pharmaceutical Industries on October 11, 2024 and sell it today you would earn a total of  485.00  from holding Teva Pharmaceutical Industries or generate 30.6% return on investment over 90 days.

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

CARSALESCOM  vs.  Teva Pharmaceutical Industries

CARSALESCOM

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CARSALESCOM are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, CARSALESCOM is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Teva Pharmaceutical

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Teva Pharmaceutical Industries are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Teva Pharmaceutical reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CARSALESCOM and Teva Pharmaceutical

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

The idea behind CARSALESCOM and Teva Pharmaceutical Industries 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.