Correlation Between Caribbean Utilities and Pfizer

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

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

Diversification Opportunities for Caribbean Utilities and Pfizer

0.65

Correlation Coefficient

Caribbean Utilities  Pfizer

Poor diversification

The 3 months correlation between Caribbean and Pfizer is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Caribbean Utilities and Pfizer Inc CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc CDR and Caribbean Utilities 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 Caribbean Utilities 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 CDR has no effect on the direction of Caribbean Utilities i.e., Caribbean Utilities and Pfizer go up and down completely randomly.

Pair Corralation between Caribbean Utilities and Pfizer

Assuming the 90 days trading horizon Caribbean Utilities is expected to generate 0.89 times more return on investment than Pfizer. However, Caribbean Utilities is 1.13 times less risky than Pfizer. It trades about 0.02 of its potential returns per unit of risk. Pfizer Inc CDR is currently generating about -0.07 per unit of risk. If you would invest  1,381  in Caribbean Utilities on September 3, 2024 and sell it today you would earn a total of  19.00  from holding Caribbean Utilities or generate 1.38% return on investment over 90 days.

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

Caribbean Utilities  vs.  Pfizer Inc CDR

Caribbean Utilities

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Caribbean Utilities are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Caribbean Utilities is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pfizer Inc CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pfizer Inc CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Pfizer is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Caribbean Utilities and Pfizer

The main advantage of trading using opposite Caribbean Utilities and Pfizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caribbean Utilities 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 Caribbean Utilities and Pfizer Inc CDR 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.