Correlation Between Pfizer and Lumos Pharma

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

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

Diversification Opportunities for Pfizer and Lumos Pharma

-0.71

Correlation Coefficient

Pfizer  Lumos Pharma

Pay attention - limited upside

The 3 months correlation between Pfizer and Lumos is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Lumos Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumos Pharma 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 Lumos Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumos Pharma has no effect on the direction of Pfizer i.e., Pfizer and Lumos Pharma go up and down completely randomly.

Pair Corralation between Pfizer and Lumos Pharma

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the Lumos Pharma. In addition to that, Pfizer is 2.8 times more volatile than Lumos Pharma. It trades about -0.06 of its total potential returns per unit of risk. Lumos Pharma is currently generating about -0.05 per unit of volatility. If you would invest  437.00  in Lumos Pharma on September 12, 2024 and sell it today you would lose (3.00) from holding Lumos Pharma or give up 0.69% of portfolio value over 90 days.

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

Pfizer Inc  vs.  Lumos Pharma

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.

Lumos Pharma

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lumos Pharma are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Lumos Pharma displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pfizer and Lumos Pharma

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

The idea behind Pfizer Inc and Lumos Pharma 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.

Check out your portfolio center.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .