Correlation Between Micron Technology and Teva Pharmaceutical

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Can any of the company-specific risk be diversified away by investing in both Micron Technology 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 Micron Technology and Teva Pharmaceutical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and Teva Pharmaceutical Industries, you can compare the effects of market volatilities on Micron Technology 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 Micron Technology with a short position of Teva Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Teva Pharmaceutical.

Diversification Opportunities for Micron Technology and Teva Pharmaceutical

-0.29
  Correlation Coefficient

Very good diversification

The 3 months correlation between Micron and Teva is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Teva Pharmaceutical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teva Pharmaceutical and Micron Technology 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 Micron Technology 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 Micron Technology i.e., Micron Technology and Teva Pharmaceutical go up and down completely randomly.

Pair Corralation between Micron Technology and Teva Pharmaceutical

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 1.44 times less return on investment than Teva Pharmaceutical. But when comparing it to its historical volatility, Micron Technology is 1.05 times less risky than Teva Pharmaceutical. It trades about 0.05 of its potential returns per unit of risk. Teva Pharmaceutical Industries is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  940.00  in Teva Pharmaceutical Industries on September 26, 2024 and sell it today you would earn a total of  1,180  from holding Teva Pharmaceutical Industries or generate 125.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy98.22%
ValuesDaily Returns

Micron Technology  vs.  Teva Pharmaceutical Industries

 Performance 
       Timeline  
Micron Technology 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Micron Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
Teva Pharmaceutical 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Teva Pharmaceutical Industries are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Teva Pharmaceutical reported solid returns over the last few months and may actually be approaching a breakup point.

Micron Technology and Teva Pharmaceutical Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Micron Technology and Teva Pharmaceutical

The main advantage of trading using opposite Micron Technology and Teva Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology 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.
The idea behind Micron Technology and Teva Pharmaceutical Industries pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.

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