Correlation Between Pfizer and American Funds

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

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

Diversification Opportunities for Pfizer and American Funds

-0.51

Correlation Coefficient

Pfizer  American Funds

Excellent diversification

The 3 months correlation between Pfizer and American is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and American Funds Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Growth 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Growth has no effect on the direction of Pfizer i.e., Pfizer and American Funds go up and down completely randomly.

Pair Corralation between Pfizer and American Funds

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the American Funds. In addition to that, Pfizer is 1.86 times more volatile than American Funds Growth. It trades about -0.06 of its total potential returns per unit of risk. American Funds Growth is currently generating about 0.17 per unit of volatility. If you would invest  2,530  in American Funds Growth on September 3, 2024 and sell it today you would earn a total of  216.00  from holding American Funds Growth or generate 8.54% return on investment over 90 days.

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

Pfizer Inc  vs.  American Funds Growth

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.

American Funds Growth

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds Growth are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, American Funds may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Pfizer and American Funds

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

The idea behind Pfizer Inc and American Funds Growth 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.