Correlation Between Montauk Renewables and PFIZER

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

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

Diversification Opportunities for Montauk Renewables and PFIZER

0.27

Correlation Coefficient

Montauk Renewables  PFIZER

Modest diversification

The 3 months correlation between Montauk and PFIZER is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Montauk Renewables and PFIZER INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PFIZER INC and Montauk Renewables 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 Montauk Renewables 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 Montauk Renewables i.e., Montauk Renewables and PFIZER go up and down completely randomly.

Pair Corralation between Montauk Renewables and PFIZER

Given the investment horizon of 90 days Montauk Renewables is expected to generate 3.74 times more return on investment than PFIZER. However, Montauk Renewables is 3.74 times more volatile than PFIZER INC. It trades about 0.05 of its potential returns per unit of risk. PFIZER INC is currently generating about -0.09 per unit of risk. If you would invest  402.00  in Montauk Renewables on October 14, 2024 and sell it today you would earn a total of  10.00  from holding Montauk Renewables or generate 2.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

Montauk Renewables  vs.  PFIZER INC

Montauk Renewables

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional 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 basic indicators, PFIZER is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Montauk Renewables and PFIZER

The main advantage of trading using opposite Montauk Renewables and PFIZER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Montauk Renewables 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 Montauk Renewables 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.