Correlation Between Employers Holdings and PFIZER

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

By analyzing existing cross correlation between Employers Holdings and PFIZER INC 44, you can compare the effects of market volatilities on Employers Holdings 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 Employers Holdings with a short position of PFIZER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Employers Holdings and PFIZER.

Diversification Opportunities for Employers Holdings and PFIZER

-0.05

Correlation Coefficient

Employers Holdings  PFIZER

Good diversification

The 3 months correlation between Employers and PFIZER is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Employers Holdings and PFIZER INC 44 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PFIZER INC 44 and Employers Holdings 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 Employers 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 44 has no effect on the direction of Employers Holdings i.e., Employers Holdings and PFIZER go up and down completely randomly.

Pair Corralation between Employers Holdings and PFIZER

Considering the 90-day investment horizon Employers Holdings is expected to under-perform the PFIZER. But the stock apears to be less risky and, when comparing its historical volatility, Employers Holdings is 9.28 times less risky than PFIZER. The stock trades about -0.24 of its potential returns per unit of risk. The PFIZER INC 44 is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  8,949  in PFIZER INC 44 on September 24, 2024 and sell it today you would earn a total of  3,970  from holding PFIZER INC 44 or generate 44.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.91%
Values	Daily Returns

Employers Holdings  vs.  PFIZER INC 44

Employers Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Employers Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent forward indicators, Employers Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PFIZER INC 44

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PFIZER INC 44 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, PFIZER sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Employers Holdings and PFIZER

The main advantage of trading using opposite Employers Holdings and PFIZER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Employers Holdings 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 Employers Holdings and PFIZER INC 44 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.