Correlation Between Teva Pharmaceutical and Lear
Can any of the company-specific risk be diversified away by investing in both Teva Pharmaceutical and Lear 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 Lear 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 Lear Corporation, you can compare the effects of market volatilities on Teva Pharmaceutical and Lear 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 Lear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teva Pharmaceutical and Lear.
Diversification Opportunities for Teva Pharmaceutical and Lear
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Teva and Lear is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Teva Pharmaceutical Industries and Lear Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lear 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 Lear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lear has no effect on the direction of Teva Pharmaceutical i.e., Teva Pharmaceutical and Lear go up and down completely randomly.
Pair Corralation between Teva Pharmaceutical and Lear
Assuming the 90 days trading horizon Teva Pharmaceutical Industries is expected to generate 1.39 times more return on investment than Lear. However, Teva Pharmaceutical is 1.39 times more volatile than Lear Corporation. It trades about 0.07 of its potential returns per unit of risk. Lear Corporation is currently generating about 0.02 per unit of risk. If you would invest 255,500 in Teva Pharmaceutical Industries on January 25, 2024 and sell it today you would earn a total of 242,300 from holding Teva Pharmaceutical Industries or generate 94.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 78.79% |
| Values | Daily Returns |
Teva Pharmaceutical Industries vs. Lear Corp.
Performance |
| Timeline |
| Teva Pharmaceutical |
| Lear |
Teva Pharmaceutical and Lear Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Teva Pharmaceutical and Lear
The main advantage of trading using opposite Teva Pharmaceutical and Lear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teva Pharmaceutical position performs unexpectedly, Lear 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 Lear will offset losses from the drop in Lear's long position.| Teva Pharmaceutical vs. Bezeq Israeli Telecommunication | Teva Pharmaceutical vs. El Al Israel | Teva Pharmaceutical vs. Bank Leumi Le Israel | Teva Pharmaceutical vs. Elbit Systems |
Check out your portfolio center.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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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