Correlation Between Pfizer and Apple

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

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

Diversification Opportunities for Pfizer and Apple

0.63

Correlation Coefficient

Pfizer  Apple

Poor diversification

The 3 months correlation between Pfizer and Apple is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Apple Inc DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc DRC and Pfizer 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 Pfizer Inc are associated (or correlated) with Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc DRC has no effect on the direction of Pfizer i.e., Pfizer and Apple go up and down completely randomly.

Pair Corralation between Pfizer and Apple

Assuming the 90 days trading horizon Pfizer is expected to generate 3.8 times less return on investment than Apple. But when comparing it to its historical volatility, Pfizer Inc is 1.1 times less risky than Apple. It trades about 0.02 of its potential returns per unit of risk. Apple Inc DRC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  603,400  in Apple Inc DRC on December 4, 2024 and sell it today you would earn a total of  856,600  from holding Apple Inc DRC or generate 141.96% return on investment over 90 days.

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

Pfizer Inc  vs.  Apple Inc DRC

Pfizer Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pfizer Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Pfizer sustained solid returns over the last few months and may actually be approaching a breakup point.

Apple Inc DRC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc DRC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Pfizer and Apple

The main advantage of trading using opposite Pfizer and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pfizer position performs unexpectedly, Apple 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 Apple will offset losses from the drop in Apple's long position.

The idea behind Pfizer Inc and Apple Inc DRC 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.