Correlation Between Teva Pharmaceutical and Infimer

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

Diversification Opportunities for Teva Pharmaceutical and Infimer

0.12

Correlation Coefficient

Teva Pharmaceutical  Infimer

Average diversification

The 3 months correlation between Teva and Infimer is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Teva Pharmaceutical Industries and Infimer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infimer 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 Infimer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infimer has no effect on the direction of Teva Pharmaceutical i.e., Teva Pharmaceutical and Infimer go up and down completely randomly.

Pair Corralation between Teva Pharmaceutical and Infimer

Assuming the 90 days trading horizon Teva Pharmaceutical Industries is expected to under-perform the Infimer. But the stock apears to be less risky and, when comparing its historical volatility, Teva Pharmaceutical Industries is 197.67 times less risky than Infimer. The stock trades about -0.07 of its potential returns per unit of risk. The Infimer is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  4,700  in Infimer on September 17, 2024 and sell it today you would earn a total of  2,084,300  from holding Infimer or generate 44346.81% return on investment over 90 days.

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

Teva Pharmaceutical Industries  vs.  Infimer

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.

Infimer

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Infimer are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Infimer sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Teva Pharmaceutical and Infimer

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

The idea behind Teva Pharmaceutical Industries and Infimer 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.

Check out your portfolio center.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.