Correlation Between Pfizer and Extendicare

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

By analyzing existing cross correlation between Pfizer Inc CDR and Extendicare, you can compare the effects of market volatilities on Pfizer and Extendicare 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 Pfizer with a short position of Extendicare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pfizer and Extendicare.

Diversification Opportunities for Pfizer and Extendicare

-0.86

Correlation Coefficient

Pfizer  Extendicare

Pay attention - limited upside

The 3 months correlation between Pfizer and Extendicare is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc CDR and Extendicare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extendicare and Pfizer 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 Pfizer Inc CDR are associated (or correlated) with Extendicare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extendicare has no effect on the direction of Pfizer i.e., Pfizer and Extendicare go up and down completely randomly.

Pair Corralation between Pfizer and Extendicare

Assuming the 90 days trading horizon Pfizer Inc CDR is expected to under-perform the Extendicare. But the stock apears to be less risky and, when comparing its historical volatility, Pfizer Inc CDR is 1.02 times less risky than Extendicare. The stock trades about -0.13 of its potential returns per unit of risk. The Extendicare is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  929.00  in Extendicare on September 12, 2024 and sell it today you would earn a total of  135.00  from holding Extendicare or generate 14.53% return on investment over 90 days.

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

Pfizer Inc CDR  vs.  Extendicare

Pfizer Inc CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pfizer Inc CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Extendicare

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Extendicare are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Extendicare displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pfizer and Extendicare

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

The idea behind Pfizer Inc CDR and Extendicare 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.