Correlation Between Takeda Pharmaceutical and Hikma Pharmaceuticals

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

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

Diversification Opportunities for Takeda Pharmaceutical and Hikma Pharmaceuticals

0.51

Correlation Coefficient

Takeda Pharmaceutical  Hikma Pharmaceuticals

Very weak diversification

The 3 months correlation between Takeda and Hikma is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Takeda Pharmaceutical Co and Hikma Pharmaceuticals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hikma Pharmaceuticals PLC and Takeda Pharmaceutical 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 Takeda Pharmaceutical Co are associated (or correlated) with Hikma Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hikma Pharmaceuticals PLC has no effect on the direction of Takeda Pharmaceutical i.e., Takeda Pharmaceutical and Hikma Pharmaceuticals go up and down completely randomly.

Pair Corralation between Takeda Pharmaceutical and Hikma Pharmaceuticals

Considering the 90-day investment horizon Takeda Pharmaceutical Co is expected to generate 0.47 times more return on investment than Hikma Pharmaceuticals. However, Takeda Pharmaceutical Co is 2.13 times less risky than Hikma Pharmaceuticals. It trades about -0.11 of its potential returns per unit of risk. Hikma Pharmaceuticals PLC is currently generating about -0.21 per unit of risk. If you would invest  1,353  in Takeda Pharmaceutical Co on February 3, 2024 and sell it today you would lose (26.00) from holding Takeda Pharmaceutical Co or give up 1.92% of portfolio value over 90 days.

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

Takeda Pharmaceutical Co  vs.  Hikma Pharmaceuticals PLC

Takeda Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Takeda Pharmaceutical Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Takeda Pharmaceutical is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Hikma Pharmaceuticals PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hikma Pharmaceuticals PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Takeda Pharmaceutical and Hikma Pharmaceuticals

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

The idea behind Takeda Pharmaceutical Co and Hikma Pharmaceuticals 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.

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..