Correlation Between Amicus Therapeutics and Teva Pharma

Can any of the company-specific risk be diversified away by investing in both Amicus Therapeutics and Teva Pharma 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 Amicus Therapeutics and Teva Pharma into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Amicus Therapeutics and Teva Pharma Industries, you can compare the effects of market volatilities on Amicus Therapeutics and Teva Pharma 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 Amicus Therapeutics with a short position of Teva Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amicus Therapeutics and Teva Pharma.

Diversification Opportunities for Amicus Therapeutics and Teva Pharma

0.81

Correlation Coefficient

Amicus Therapeutics  Teva Pharma

Very poor diversification

The 3 months correlation between Amicus and Teva is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Amicus Therapeutics and Teva Pharma Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teva Pharma Industries and Amicus Therapeutics 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 Amicus Therapeutics are associated (or correlated) with Teva Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teva Pharma Industries has no effect on the direction of Amicus Therapeutics i.e., Amicus Therapeutics and Teva Pharma go up and down completely randomly.

Pair Corralation between Amicus Therapeutics and Teva Pharma

Given the investment horizon of 90 days Amicus Therapeutics is expected to under-perform the Teva Pharma. But the stock apears to be less risky and, when comparing its historical volatility, Amicus Therapeutics is 1.01 times less risky than Teva Pharma. The stock trades about -0.31 of its potential returns per unit of risk. The Teva Pharma Industries is currently generating about -0.25 of returns per unit of risk over similar time horizon. If you would invest  1,864  in Teva Pharma Industries on September 3, 2024 and sell it today you would lose (186.00) from holding Teva Pharma Industries or give up 9.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Amicus Therapeutics  vs.  Teva Pharma Industries

Amicus Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amicus Therapeutics 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 essential indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Teva Pharma Industries

Risk-Adjusted Performance

0 of 100

Very Weak

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.

Pair Trading with Amicus Therapeutics and Teva Pharma

The main advantage of trading using opposite Amicus Therapeutics and Teva Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amicus Therapeutics position performs unexpectedly, Teva Pharma 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 Pharma will offset losses from the drop in Teva Pharma's long position.

The idea behind Amicus Therapeutics and Teva Pharma 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.