Correlation Between Pfizer and Masonite International

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

By analyzing existing cross correlation between Pfizer Inc and Masonite International Corp, you can compare the effects of market volatilities on Pfizer and Masonite International 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 Masonite International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pfizer and Masonite International.

Diversification Opportunities for Pfizer and Masonite International

-0.64

Correlation Coefficient

Pfizer  Masonite International

Excellent diversification

The 3 months correlation between Pfizer and Masonite is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Masonite International Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masonite International 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 are associated (or correlated) with Masonite International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masonite International has no effect on the direction of Pfizer i.e., Pfizer and Masonite International go up and down completely randomly.

Pair Corralation between Pfizer and Masonite International

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the Masonite International. But the stock apears to be less risky and, when comparing its historical volatility, Pfizer Inc is 1.35 times less risky than Masonite International. The stock trades about -0.08 of its potential returns per unit of risk. The Masonite International Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  7,748  in Masonite International Corp on September 3, 2024 and sell it today you would earn a total of  2,657  from holding Masonite International Corp or generate 34.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	30.91%
Values	Daily Returns

Pfizer Inc  vs.  Masonite International Corp

Pfizer Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pfizer Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Pfizer is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Masonite International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Masonite International Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Masonite International is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Pfizer and Masonite International

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

The idea behind Pfizer Inc and Masonite International Corp 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.