Correlation Between Pfizer and PetroShale

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

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

Diversification Opportunities for Pfizer and PetroShale

0.72

Correlation Coefficient

Pfizer  PetroShale

Poor diversification

The 3 months correlation between Pfizer and PetroShale is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and PetroShale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroShale 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 PetroShale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroShale has no effect on the direction of Pfizer i.e., Pfizer and PetroShale go up and down completely randomly.

Pair Corralation between Pfizer and PetroShale

Considering the 90-day investment horizon Pfizer Inc is expected to generate 0.57 times more return on investment than PetroShale. However, Pfizer Inc is 1.75 times less risky than PetroShale. It trades about -0.06 of its potential returns per unit of risk. PetroShale is currently generating about -0.2 per unit of risk. If you would invest  2,787  in Pfizer Inc on September 3, 2024 and sell it today you would lose (166.00) from holding Pfizer Inc or give up 5.96% of portfolio value over 90 days.

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

Pfizer Inc  vs.  PetroShale

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.

PetroShale

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PetroShale has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Pfizer and PetroShale

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

The idea behind Pfizer Inc and PetroShale 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.