Correlation Between Dow Jones and Teva Pharmaceutical
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Teva Pharmaceutical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Teva Pharmaceutical Industries, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Teva Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Teva Pharmaceutical.
Diversification Opportunities for Dow Jones and Teva Pharmaceutical
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and Teva is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Teva Pharmaceutical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teva Pharmaceutical and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Teva Pharmaceutical go up and down completely randomly.
Pair Corralation between Dow Jones and Teva Pharmaceutical
Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the Teva Pharmaceutical. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 4.73 times less risky than Teva Pharmaceutical. The index trades about -0.05 of its potential returns per unit of risk. The Teva Pharmaceutical Industries is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,580 in Teva Pharmaceutical Industries on October 14, 2024 and sell it today you would earn a total of 450.00 from holding Teva Pharmaceutical Industries or generate 28.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.83% |
| Values | Daily Returns |
Dow Jones Industrial vs. Teva Pharmaceutical Industries
Performance |
| Timeline |
Dow Jones and Teva Pharmaceutical Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Teva Pharmaceutical Industries
Pair trading matchups for Teva Pharmaceutical
Pair Trading with Dow Jones and Teva Pharmaceutical
The main advantage of trading using opposite Dow Jones and Teva Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Chipotle Mexican Grill | Dow Jones vs. Teleflex Incorporated | Dow Jones vs. Dine Brands Global | Dow Jones vs. Alvotech |
| Teva Pharmaceutical vs. Magic Software Enterprises | Teva Pharmaceutical vs. MAGIC SOFTWARE ENTR | Teva Pharmaceutical vs. UPDATE SOFTWARE | Teva Pharmaceutical vs. STRAYER EDUCATION |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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