Correlation Between Teva Pharma and CLS Holdings

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

Diversification Opportunities for Teva Pharma and CLS Holdings

-0.27
  Correlation Coefficient

Very good diversification

The 3 months correlation between Teva and CLS is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Teva Pharma Industries and CLS Holdings USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CLS Holdings USA and Teva Pharma 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 Pharma Industries are associated (or correlated) with CLS Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CLS Holdings USA has no effect on the direction of Teva Pharma i.e., Teva Pharma and CLS Holdings go up and down completely randomly.

Pair Corralation between Teva Pharma and CLS Holdings

Given the investment horizon of 90 days Teva Pharma is expected to generate 56.06 times less return on investment than CLS Holdings. But when comparing it to its historical volatility, Teva Pharma Industries is 6.19 times less risky than CLS Holdings. It trades about 0.0 of its potential returns per unit of risk. CLS Holdings USA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5.21  in CLS Holdings USA on September 1, 2024 and sell it today you would lose (0.92) from holding CLS Holdings USA or give up 17.66% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.21%
ValuesDaily Returns

Teva Pharma Industries  vs.  CLS Holdings USA

 Performance 
       Timeline  
Teva Pharma Industries 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Modest
Over the last 90 days Teva Pharma Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
CLS Holdings USA 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in CLS Holdings USA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, CLS Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Teva Pharma and CLS Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Teva Pharma and CLS Holdings

The main advantage of trading using opposite Teva Pharma and CLS Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teva Pharma position performs unexpectedly, CLS Holdings 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 CLS Holdings will offset losses from the drop in CLS Holdings' long position.
The idea behind Teva Pharma Industries and CLS Holdings USA 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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