Correlation Between Teva Pharmaceutical and Catalent

Can any of the company-specific risk be diversified away by investing in both Teva Pharmaceutical and Catalent 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 Catalent 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 Catalent, you can compare the effects of market volatilities on Teva Pharmaceutical and Catalent 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 Catalent. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teva Pharmaceutical and Catalent.

Diversification Opportunities for Teva Pharmaceutical and Catalent

0.51

Correlation Coefficient

Teva Pharmaceutical  Catalent

Very weak diversification

The 3 months correlation between Teva and Catalent is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Teva Pharmaceutical Industries and Catalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalent 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 Catalent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalent has no effect on the direction of Teva Pharmaceutical i.e., Teva Pharmaceutical and Catalent go up and down completely randomly.

Pair Corralation between Teva Pharmaceutical and Catalent

Assuming the 90 days horizon Teva Pharmaceutical Industries is expected to generate 4.4 times more return on investment than Catalent. However, Teva Pharmaceutical is 4.4 times more volatile than Catalent. It trades about 0.14 of its potential returns per unit of risk. Catalent is currently generating about 0.22 per unit of risk. If you would invest  1,565  in Teva Pharmaceutical Industries on September 23, 2024 and sell it today you would earn a total of  555.00  from holding Teva Pharmaceutical Industries or generate 35.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.97%
Values	Daily Returns

Teva Pharmaceutical Industries  vs.  Catalent

Teva Pharmaceutical

Risk-Adjusted Performance

11 of 100

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.

Catalent

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Catalent may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Teva Pharmaceutical and Catalent

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

The idea behind Teva Pharmaceutical Industries and Catalent 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.