Correlation Between Pfizer and SPDR MSCI

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

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

Diversification Opportunities for Pfizer and SPDR MSCI

0.84

Correlation Coefficient

Pfizer  SPDR MSCI

Very poor diversification

The 3 months correlation between Pfizer and SPDR is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and SPDR MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI EAFE 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 SPDR MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI EAFE has no effect on the direction of Pfizer i.e., Pfizer and SPDR MSCI go up and down completely randomly.

Pair Corralation between Pfizer and SPDR MSCI

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the SPDR MSCI. In addition to that, Pfizer is 1.72 times more volatile than SPDR MSCI EAFE. It trades about -0.08 of its total potential returns per unit of risk. SPDR MSCI EAFE is currently generating about -0.04 per unit of volatility. If you would invest  4,258  in SPDR MSCI EAFE on September 4, 2024 and sell it today you would lose (98.00) from holding SPDR MSCI EAFE or give up 2.3% of portfolio value over 90 days.

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

Pfizer Inc  vs.  SPDR MSCI EAFE

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 latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

SPDR MSCI EAFE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR MSCI EAFE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, SPDR MSCI is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pfizer and SPDR MSCI

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

The idea behind Pfizer Inc and SPDR MSCI EAFE 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.