Correlation Between Bausch Health and Teva Pharma
Can any of the company-specific risk be diversified away by investing in both Bausch Health and Teva Pharma 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 Bausch Health and Teva Pharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bausch Health Companies and Teva Pharma Industries, you can compare the effects of market volatilities on Bausch Health and Teva Pharma 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 Bausch Health with a short position of Teva Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bausch Health and Teva Pharma.
Diversification Opportunities for Bausch Health and Teva Pharma
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bausch and Teva is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Teva Pharma Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teva Pharma Industries and Bausch Health 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 Bausch Health Companies are associated (or correlated) with Teva Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teva Pharma Industries has no effect on the direction of Bausch Health i.e., Bausch Health and Teva Pharma go up and down completely randomly.
Pair Corralation between Bausch Health and Teva Pharma
Considering the 90-day investment horizon Bausch Health Companies is expected to under-perform the Teva Pharma. But the stock apears to be less risky and, when comparing its historical volatility, Bausch Health Companies is 1.72 times less risky than Teva Pharma. The stock trades about -0.07 of its potential returns per unit of risk. The Teva Pharma Industries is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,681 in Teva Pharma Industries on October 20, 2024 and sell it today you would earn a total of 511.00 from holding Teva Pharma Industries or generate 30.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bausch Health Companies vs. Teva Pharma Industries
Performance |
| Timeline |
| Bausch Health Companies |
| Teva Pharma Industries |
Bausch Health and Teva Pharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bausch Health and Teva Pharma
The main advantage of trading using opposite Bausch Health and Teva Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bausch Health position performs unexpectedly, Teva Pharma 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 Pharma will offset losses from the drop in Teva Pharma's long position.| Bausch Health vs. Viatris | Bausch Health vs. Tilray Inc | Bausch Health vs. Zoetis Inc | Bausch Health vs. Emergent Biosolutions |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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