Correlation Between Applied Materials and Teva Pharmaceutical
Can any of the company-specific risk be diversified away by investing in both Applied Materials 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 Applied Materials and Teva Pharmaceutical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Teva Pharmaceutical Industries, you can compare the effects of market volatilities on Applied Materials 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 Applied Materials with a short position of Teva Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Teva Pharmaceutical.
Diversification Opportunities for Applied Materials and Teva Pharmaceutical
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Applied and Teva is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Teva Pharmaceutical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teva Pharmaceutical and Applied Materials 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 Applied Materials 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 Applied Materials i.e., Applied Materials and Teva Pharmaceutical go up and down completely randomly.
Pair Corralation between Applied Materials and Teva Pharmaceutical
If you would invest 17,138 in Applied Materials on November 6, 2024 and sell it today you would lose (40.00) from holding Applied Materials or give up 0.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 4.76% |
| Values | Daily Returns |
Applied Materials vs. Teva Pharmaceutical Industries
Performance |
| Timeline |
| Applied Materials |
| Teva Pharmaceutical |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
Applied Materials and Teva Pharmaceutical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Teva Pharmaceutical
The main advantage of trading using opposite Applied Materials and Teva Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials 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.| Applied Materials vs. Flutter Entertainment PLC | Applied Materials vs. BII Railway Transportation | Applied Materials vs. GOLD ROAD RES | Applied Materials vs. PARKEN Sport Entertainment |
| Teva Pharmaceutical vs. Telecom Argentina SA | Teva Pharmaceutical vs. Perseus Mining Limited | Teva Pharmaceutical vs. FIREWEED METALS P | Teva Pharmaceutical vs. Mitsui Chemicals |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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