Correlation Between Teva Pharmaceutical and Fattal 1998

Can any of the company-specific risk be diversified away by investing in both Teva Pharmaceutical and Fattal 1998 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 Pharmaceutical and Fattal 1998 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Teva Pharmaceutical Industries and Fattal 1998 Holdings, you can compare the effects of market volatilities on Teva Pharmaceutical and Fattal 1998 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 Pharmaceutical with a short position of Fattal 1998. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teva Pharmaceutical and Fattal 1998.

Diversification Opportunities for Teva Pharmaceutical and Fattal 1998

0.77

Correlation Coefficient

Teva Pharmaceutical  Fattal 1998

Poor diversification

The 3 months correlation between Teva and Fattal is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Teva Pharmaceutical Industries and Fattal 1998 Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fattal 1998 Holdings and Teva 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 Teva Pharmaceutical Industries are associated (or correlated) with Fattal 1998. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fattal 1998 Holdings has no effect on the direction of Teva Pharmaceutical i.e., Teva Pharmaceutical and Fattal 1998 go up and down completely randomly.

Pair Corralation between Teva Pharmaceutical and Fattal 1998

Assuming the 90 days trading horizon Teva Pharmaceutical Industries is expected to generate 1.13 times more return on investment than Fattal 1998. However, Teva Pharmaceutical is 1.13 times more volatile than Fattal 1998 Holdings. It trades about 0.05 of its potential returns per unit of risk. Fattal 1998 Holdings is currently generating about -0.15 per unit of risk. If you would invest  519,100  in Teva Pharmaceutical Industries on February 1, 2024 and sell it today you would earn a total of  8,100  from holding Teva Pharmaceutical Industries or generate 1.56% return on investment over 90 days.

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

Teva Pharmaceutical Industries  vs.  Fattal 1998 Holdings

Teva Pharmaceutical

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Teva Pharmaceutical Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, Teva Pharmaceutical sustained solid returns over the last few months and may actually be approaching a breakup point.

Fattal 1998 Holdings

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fattal 1998 Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Fattal 1998 may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Teva Pharmaceutical and Fattal 1998

The main advantage of trading using opposite Teva Pharmaceutical and Fattal 1998 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teva Pharmaceutical position performs unexpectedly, Fattal 1998 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 Fattal 1998 will offset losses from the drop in Fattal 1998's long position.

The idea behind Teva Pharmaceutical Industries and Fattal 1998 Holdings 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.