Correlation Between Teva Pharmaceutical and BioLight Life

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

Diversification Opportunities for Teva Pharmaceutical and BioLight Life

-0.48

Correlation Coefficient

Teva Pharmaceutical  BioLight Life

Very good diversification

The 3 months correlation between Teva and BioLight is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Teva Pharmaceutical Industries and BioLight Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BioLight Life Sciences 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 BioLight Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BioLight Life Sciences has no effect on the direction of Teva Pharmaceutical i.e., Teva Pharmaceutical and BioLight Life go up and down completely randomly.

Pair Corralation between Teva Pharmaceutical and BioLight Life

Assuming the 90 days trading horizon Teva Pharmaceutical Industries is expected to generate 0.56 times more return on investment than BioLight Life. However, Teva Pharmaceutical Industries is 1.79 times less risky than BioLight Life. It trades about 0.1 of its potential returns per unit of risk. BioLight Life Sciences is currently generating about 0.05 per unit of risk. If you would invest  668,400  in Teva Pharmaceutical Industries on September 24, 2024 and sell it today you would earn a total of  102,800  from holding Teva Pharmaceutical Industries or generate 15.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Teva Pharmaceutical Industries  vs.  BioLight Life Sciences

Teva Pharmaceutical

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Teva Pharmaceutical Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Teva Pharmaceutical sustained solid returns over the last few months and may actually be approaching a breakup point.

BioLight Life Sciences

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BioLight Life Sciences are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BioLight Life sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Teva Pharmaceutical and BioLight Life

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

The idea behind Teva Pharmaceutical Industries and BioLight Life Sciences 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.