Correlation Between Eisai and Teva Pharmaceutical
Can any of the company-specific risk be diversified away by investing in both Eisai 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 Eisai and Teva Pharmaceutical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eisai Co and Teva Pharmaceutical Industries, you can compare the effects of market volatilities on Eisai 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 Eisai with a short position of Teva Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eisai and Teva Pharmaceutical.
Diversification Opportunities for Eisai and Teva Pharmaceutical
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Eisai and Teva is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Eisai Co and Teva Pharmaceutical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teva Pharmaceutical and Eisai 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 Eisai Co 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 Eisai i.e., Eisai and Teva Pharmaceutical go up and down completely randomly.
Pair Corralation between Eisai and Teva Pharmaceutical
Assuming the 90 days horizon Eisai Co is expected to under-perform the Teva Pharmaceutical. But the stock apears to be less risky and, when comparing its historical volatility, Eisai Co is 2.96 times less risky than Teva Pharmaceutical. The stock trades about -0.14 of its potential returns per unit of risk. The Teva Pharmaceutical Industries is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 1,645 in Teva Pharmaceutical Industries on October 13, 2024 and sell it today you would earn a total of 385.00 from holding Teva Pharmaceutical Industries or generate 23.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eisai Co vs. Teva Pharmaceutical Industries
Performance |
| Timeline |
| Eisai |
| Teva Pharmaceutical |
Eisai and Teva Pharmaceutical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eisai and Teva Pharmaceutical
The main advantage of trading using opposite Eisai and Teva Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eisai 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.| Eisai vs. MagnaChip Semiconductor Corp | Eisai vs. Scandinavian Tobacco Group | Eisai vs. Media and Games | Eisai vs. NXP Semiconductors NV |
| Teva Pharmaceutical vs. InterContinental Hotels Group | Teva Pharmaceutical vs. Meli Hotels International | Teva Pharmaceutical vs. The Boston Beer | Teva Pharmaceutical vs. Thai Beverage Public |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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