Correlation Between Bill and PFIZER

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

By analyzing existing cross correlation between Bill Com Holdings and PFIZER INC 4125, you can compare the effects of market volatilities on Bill 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 Bill with a short position of PFIZER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bill and PFIZER.

Diversification Opportunities for Bill and PFIZER

-0.6

Correlation Coefficient

Bill  PFIZER

Excellent diversification

The 3 months correlation between Bill and PFIZER is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Bill Com Holdings and PFIZER INC 4125 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PFIZER INC 4125 and Bill 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 Bill Com Holdings 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 4125 has no effect on the direction of Bill i.e., Bill and PFIZER go up and down completely randomly.

Pair Corralation between Bill and PFIZER

Given the investment horizon of 90 days Bill is expected to generate 2.59 times less return on investment than PFIZER. But when comparing it to its historical volatility, Bill Com Holdings is 1.41 times less risky than PFIZER. It trades about 0.13 of its potential returns per unit of risk. PFIZER INC 4125 is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  8,029  in PFIZER INC 4125 on October 25, 2024 and sell it today you would earn a total of  1,246  from holding PFIZER INC 4125 or generate 15.52% return on investment over 90 days.

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

Bill Com Holdings  vs.  PFIZER INC 4125

Bill Com Holdings

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bill Com Holdings are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile essential indicators, Bill disclosed solid returns over the last few months and may actually be approaching a breakup point.

PFIZER INC 4125

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PFIZER INC 4125 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, PFIZER may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Bill and PFIZER

The main advantage of trading using opposite Bill and PFIZER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bill 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 Bill Com Holdings and PFIZER INC 4125 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.