Correlation Between NL Industries and PFIZER

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

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

Diversification Opportunities for NL Industries and PFIZER

-0.29

Correlation Coefficient

NL Industries  PFIZER

Very good diversification

The 3 months correlation between NL Industries and PFIZER is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and PFIZER INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PFIZER INC and NL Industries 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 NL Industries 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 NL Industries i.e., NL Industries and PFIZER go up and down completely randomly.

Pair Corralation between NL Industries and PFIZER

Allowing for the 90-day total investment horizon NL Industries is expected to under-perform the PFIZER. In addition to that, NL Industries is 4.44 times more volatile than PFIZER INC. It trades about -0.11 of its total potential returns per unit of risk. PFIZER INC is currently generating about 0.09 per unit of volatility. If you would invest  8,634  in PFIZER INC on October 6, 2024 and sell it today you would earn a total of  111.00  from holding PFIZER INC or generate 1.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

NL Industries  vs.  PFIZER INC

NL Industries

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NL Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, NL Industries may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NL Industries and PFIZER

The main advantage of trading using opposite NL Industries and PFIZER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NL Industries 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 NL Industries 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.