Correlation Between BHP Group and Pfizer

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

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

Diversification Opportunities for BHP Group and Pfizer

0.72

Correlation Coefficient

BHP Group  Pfizer

Poor diversification

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

Pair Corralation between BHP Group and Pfizer

Assuming the 90 days trading horizon BHP Group is expected to generate 6.97 times less return on investment than Pfizer. In addition to that, BHP Group is 1.31 times more volatile than Pfizer Inc. It trades about 0.02 of its total potential returns per unit of risk. Pfizer Inc is currently generating about 0.14 per unit of volatility. If you would invest  720,000  in Pfizer Inc on October 26, 2024 and sell it today you would earn a total of  64,000  from holding Pfizer Inc or generate 8.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.62%
Values	Daily Returns

BHP Group Limited  vs.  Pfizer Inc

BHP Group Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BHP Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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. Despite somewhat strong technical and fundamental indicators, Pfizer is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BHP Group and Pfizer

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

The idea behind BHP Group Limited and Pfizer Inc 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.