Correlation Between Visa and Teva Pharmaceutical
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and Teva Pharmaceutical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Teva Pharmaceutical Industries, you can compare the effects of market volatilities on Visa 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 Visa with a short position of Teva Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Teva Pharmaceutical.
Diversification Opportunities for Visa and Teva Pharmaceutical
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Visa and Teva is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Teva Pharmaceutical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teva Pharmaceutical and Visa 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 Visa Class A 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 Visa i.e., Visa and Teva Pharmaceutical go up and down completely randomly.
Pair Corralation between Visa and Teva Pharmaceutical
Taking into account the 90-day investment horizon Visa Class A is expected to under-perform the Teva Pharmaceutical. But the stock apears to be less risky and, when comparing its historical volatility, Visa Class A is 2.44 times less risky than Teva Pharmaceutical. The stock trades about -0.3 of its potential returns per unit of risk. The Teva Pharmaceutical Industries is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 488,500 in Teva Pharmaceutical Industries on January 19, 2024 and sell it today you would earn a total of 6,500 from holding Teva Pharmaceutical Industries or generate 1.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 81.82% |
| Values | Daily Returns |
Visa Class A vs. Teva Pharmaceutical Industries
Performance |
| Timeline |
| Visa Class A |
| Teva Pharmaceutical |
Visa and Teva Pharmaceutical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Teva Pharmaceutical
The main advantage of trading using opposite Visa and Teva Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. American Express | Visa vs. Capital One Financial | Visa vs. Upstart HoldingsInc | Visa vs. Ally Financial |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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