Correlation Between B Communications and Teva Pharmaceutical
Can any of the company-specific risk be diversified away by investing in both B Communications 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 B Communications and Teva Pharmaceutical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between B Communications and Teva Pharmaceutical Industries, you can compare the effects of market volatilities on B Communications 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 B Communications with a short position of Teva Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of B Communications and Teva Pharmaceutical.
Diversification Opportunities for B Communications and Teva Pharmaceutical
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between BCOM and Teva is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding B Communications and Teva Pharmaceutical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teva Pharmaceutical and B Communications 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 B Communications 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 B Communications i.e., B Communications and Teva Pharmaceutical go up and down completely randomly.
Pair Corralation between B Communications and Teva Pharmaceutical
Assuming the 90 days trading horizon B Communications is expected to generate 1.48 times more return on investment than Teva Pharmaceutical. However, B Communications is 1.48 times more volatile than Teva Pharmaceutical Industries. It trades about 0.44 of its potential returns per unit of risk. Teva Pharmaceutical Industries is currently generating about -0.06 per unit of risk. If you would invest 118,300 in B Communications on September 13, 2024 and sell it today you would earn a total of 58,100 from holding B Communications or generate 49.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
B Communications vs. Teva Pharmaceutical Industries
Performance |
| Timeline |
| B Communications |
| Teva Pharmaceutical |
B Communications and Teva Pharmaceutical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with B Communications and Teva Pharmaceutical
The main advantage of trading using opposite B Communications and Teva Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if B Communications 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.| B Communications vs. Bezeq Israeli Telecommunication | B Communications vs. Tower Semiconductor | B Communications vs. Israel Discount Bank | B Communications vs. Photomyne |
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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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