Correlation Between Teva Pharmaceutical and ICL Israel
Can any of the company-specific risk be diversified away by investing in both Teva Pharmaceutical and ICL Israel 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 Teva Pharmaceutical and ICL Israel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Teva Pharmaceutical Industries and ICL Israel Chemicals, you can compare the effects of market volatilities on Teva Pharmaceutical and ICL Israel 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 Teva Pharmaceutical with a short position of ICL Israel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teva Pharmaceutical and ICL Israel.
Diversification Opportunities for Teva Pharmaceutical and ICL Israel
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Teva and ICL is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Teva Pharmaceutical Industries and ICL Israel Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICL Israel Chemicals and Teva Pharmaceutical 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 Teva Pharmaceutical Industries are associated (or correlated) with ICL Israel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICL Israel Chemicals has no effect on the direction of Teva Pharmaceutical i.e., Teva Pharmaceutical and ICL Israel go up and down completely randomly.
Pair Corralation between Teva Pharmaceutical and ICL Israel
Assuming the 90 days trading horizon Teva Pharmaceutical is expected to generate 5.36 times less return on investment than ICL Israel. In addition to that, Teva Pharmaceutical is 1.35 times more volatile than ICL Israel Chemicals. It trades about 0.02 of its total potential returns per unit of risk. ICL Israel Chemicals is currently generating about 0.18 per unit of volatility. If you would invest 145,431 in ICL Israel Chemicals on November 3, 2024 and sell it today you would earn a total of 67,569 from holding ICL Israel Chemicals or generate 46.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Teva Pharmaceutical Industries vs. ICL Israel Chemicals
Performance |
| Timeline |
| Teva Pharmaceutical |
| ICL Israel Chemicals |
Teva Pharmaceutical and ICL Israel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Teva Pharmaceutical and ICL Israel
The main advantage of trading using opposite Teva Pharmaceutical and ICL Israel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teva Pharmaceutical position performs unexpectedly, ICL Israel 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 ICL Israel will offset losses from the drop in ICL Israel's long position.| Teva Pharmaceutical vs. Bezeq Israeli Telecommunication | Teva Pharmaceutical vs. El Al Israel | Teva Pharmaceutical vs. Bank Leumi Le Israel | Teva Pharmaceutical vs. Elbit Systems |
| ICL Israel vs. Elbit Systems | ICL Israel vs. Bezeq Israeli Telecommunication | ICL Israel vs. Bank Hapoalim | ICL Israel vs. Teva Pharmaceutical Industries |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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