Correlation Between Teva Pharma and Ocean Biomedical

Can any of the company-specific risk be diversified away by investing in both Teva Pharma and Ocean Biomedical 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 Pharma and Ocean Biomedical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Teva Pharma Industries and Ocean Biomedical, you can compare the effects of market volatilities on Teva Pharma and Ocean Biomedical 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 Pharma with a short position of Ocean Biomedical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teva Pharma and Ocean Biomedical.

Diversification Opportunities for Teva Pharma and Ocean Biomedical

0.76

Correlation Coefficient

Teva Pharma  Ocean Biomedical

Poor diversification

The 3 months correlation between Teva and Ocean is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Teva Pharma Industries and Ocean Biomedical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ocean Biomedical and Teva Pharma 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 Pharma Industries are associated (or correlated) with Ocean Biomedical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ocean Biomedical has no effect on the direction of Teva Pharma i.e., Teva Pharma and Ocean Biomedical go up and down completely randomly.

Pair Corralation between Teva Pharma and Ocean Biomedical

Given the investment horizon of 90 days Teva Pharma Industries is expected to generate 0.54 times more return on investment than Ocean Biomedical. However, Teva Pharma Industries is 1.85 times less risky than Ocean Biomedical. It trades about -0.22 of its potential returns per unit of risk. Ocean Biomedical is currently generating about -0.28 per unit of risk. If you would invest  1,844  in Teva Pharma Industries on September 1, 2024 and sell it today you would lose (166.00) from holding Teva Pharma Industries or give up 9.0% of portfolio value over 90 days.

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

Teva Pharma Industries  vs.  Ocean Biomedical

Teva Pharma Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teva Pharma 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.

Ocean Biomedical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ocean Biomedical 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 technical and fundamental 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.

Pair Trading with Teva Pharma and Ocean Biomedical

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

The idea behind Teva Pharma Industries and Ocean Biomedical 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.