Correlation Between Teva Pharmaceutical and RIV Capital

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

Diversification Opportunities for Teva Pharmaceutical and RIV Capital

0.73

Correlation Coefficient

Teva Pharmaceutical  RIV Capital

Poor diversification

The 3 months correlation between Teva and RIV is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Teva Pharmaceutical Industries and RIV Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RIV Capital 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 RIV Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RIV Capital has no effect on the direction of Teva Pharmaceutical i.e., Teva Pharmaceutical and RIV Capital go up and down completely randomly.

Pair Corralation between Teva Pharmaceutical and RIV Capital

Assuming the 90 days trading horizon Teva Pharmaceutical Industries is expected to under-perform the RIV Capital. But the stock apears to be less risky and, when comparing its historical volatility, Teva Pharmaceutical Industries is 4.29 times less risky than RIV Capital. The stock trades about -0.08 of its potential returns per unit of risk. The RIV Capital is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  13.00  in RIV Capital on September 12, 2024 and sell it today you would lose (3.00) from holding RIV Capital or give up 23.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	71.43%
Values	Daily Returns

Teva Pharmaceutical Industries  vs.  RIV Capital

Teva Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teva Pharmaceutical 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.

RIV Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RIV Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Teva Pharmaceutical and RIV Capital

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

The idea behind Teva Pharmaceutical Industries and RIV Capital 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 CEOs Directory module to screen CEOs from public companies around the world.