Correlation Between DAIRY FARM and Pfizer

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

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

Diversification Opportunities for DAIRY FARM and Pfizer

0.32

Correlation Coefficient

DAIRY FARM  Pfizer

Weak diversification

The 3 months correlation between DAIRY and Pfizer is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding DAIRY FARM INTL and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc and DAIRY FARM 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 DAIRY FARM INTL 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 DAIRY FARM i.e., DAIRY FARM and Pfizer go up and down completely randomly.

Pair Corralation between DAIRY FARM and Pfizer

Assuming the 90 days trading horizon DAIRY FARM INTL is expected to under-perform the Pfizer. In addition to that, DAIRY FARM is 1.79 times more volatile than Pfizer Inc. It trades about -0.05 of its total potential returns per unit of risk. Pfizer Inc is currently generating about -0.05 per unit of volatility. If you would invest  2,512  in Pfizer Inc on December 21, 2024 and sell it today you would lose (110.00) from holding Pfizer Inc or give up 4.38% of portfolio value over 90 days.

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

DAIRY FARM INTL  vs.  Pfizer Inc

DAIRY FARM INTL

Risk-Adjusted Performance

Very Weak

Over the last 90 days DAIRY FARM INTL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pfizer Inc

Risk-Adjusted Performance

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 comparatively stable technical and fundamental indicators, Pfizer is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with DAIRY FARM and Pfizer

The main advantage of trading using opposite DAIRY FARM and Pfizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAIRY FARM 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 DAIRY FARM INTL 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.