Correlation Between Takeda Pharmaceutical and Viatris

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

Diversification Opportunities for Takeda Pharmaceutical and Viatris

-0.74

Correlation Coefficient

Takeda Pharmaceutical  Viatris

Pay attention - limited upside

The 3 months correlation between Takeda and Viatris is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Takeda Pharmaceutical Co and Viatris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viatris 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 Viatris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viatris has no effect on the direction of Takeda Pharmaceutical i.e., Takeda Pharmaceutical and Viatris go up and down completely randomly.

Pair Corralation between Takeda Pharmaceutical and Viatris

Considering the 90-day investment horizon Takeda Pharmaceutical Co is expected to under-perform the Viatris. But the stock apears to be less risky and, when comparing its historical volatility, Takeda Pharmaceutical Co is 2.86 times less risky than Viatris. The stock trades about -0.05 of its potential returns per unit of risk. The Viatris is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,145  in Viatris on September 4, 2024 and sell it today you would earn a total of  175.00  from holding Viatris or generate 15.28% return on investment over 90 days.

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

Takeda Pharmaceutical Co  vs.  Viatris

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 newest stock price mess, may contribute to short-term losses for the institutional investors.

Viatris

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Viatris are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Viatris unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Takeda Pharmaceutical and Viatris

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

The idea behind Takeda Pharmaceutical Co and Viatris 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..