Correlation Between Teva Pharma and Eisai Co

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

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

Diversification Opportunities for Teva Pharma and Eisai Co

-0.73

Correlation Coefficient

Teva Pharma  Eisai Co

Pay attention - limited upside

The 3 months correlation between Teva and Eisai is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Teva Pharma Industries and Eisai Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eisai Co and Teva Pharma 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 Pharma Industries are associated (or correlated) with Eisai Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eisai Co has no effect on the direction of Teva Pharma i.e., Teva Pharma and Eisai Co go up and down completely randomly.

Pair Corralation between Teva Pharma and Eisai Co

If you would invest  1,390  in Eisai Co on January 25, 2024 and sell it today you would earn a total of  0.00  from holding Eisai Co or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	4.76%
Values	Daily Returns

Teva Pharma Industries  vs.  Eisai Co

Teva Pharma Industries

Risk-Adjusted Performance

7 of 100

OK

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

Eisai Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eisai Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Eisai Co is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Teva Pharma and Eisai Co

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

The idea behind Teva Pharma Industries and Eisai Co 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.