Correlation Between Teva Pharmaceutical and ICL Israel

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

Diversification Opportunities for Teva Pharmaceutical and ICL Israel

-0.29

Correlation Coefficient

Teva Pharmaceutical  ICL Israel

Very good diversification

The 3 months correlation between Teva and ICL is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Teva Pharmaceutical Industries and ICL Israel Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICL Israel Chemicals 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 ICL Israel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICL Israel Chemicals has no effect on the direction of Teva Pharmaceutical i.e., Teva Pharmaceutical and ICL Israel go up and down completely randomly.

Pair Corralation between Teva Pharmaceutical and ICL Israel

Assuming the 90 days trading horizon Teva Pharmaceutical Industries is expected to under-perform the ICL Israel. But the stock apears to be less risky and, when comparing its historical volatility, Teva Pharmaceutical Industries is 1.59 times less risky than ICL Israel. The stock trades about -0.17 of its potential returns per unit of risk. The ICL Israel Chemicals is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  165,600  in ICL Israel Chemicals on August 30, 2024 and sell it today you would earn a total of  1,800  from holding ICL Israel Chemicals or generate 1.09% return on investment over 90 days.

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

Teva Pharmaceutical Industries  vs.  ICL Israel Chemicals

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

ICL Israel Chemicals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ICL Israel Chemicals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, ICL Israel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Teva Pharmaceutical and ICL Israel

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

The idea behind Teva Pharmaceutical Industries and ICL Israel Chemicals 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.