Correlation Between Pfizer and NetSol Technologies

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

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

Diversification Opportunities for Pfizer and NetSol Technologies

0.49

Correlation Coefficient

Pfizer  NetSol Technologies

Very weak diversification

The 3 months correlation between Pfizer and NetSol is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and NetSol Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetSol Technologies 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 NetSol Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetSol Technologies has no effect on the direction of Pfizer i.e., Pfizer and NetSol Technologies go up and down completely randomly.

Pair Corralation between Pfizer and NetSol Technologies

Assuming the 90 days trading horizon Pfizer Inc is expected to generate 0.58 times more return on investment than NetSol Technologies. However, Pfizer Inc is 1.73 times less risky than NetSol Technologies. It trades about 0.01 of its potential returns per unit of risk. NetSol Technologies is currently generating about -0.1 per unit of risk. If you would invest  2,608  in Pfizer Inc on October 12, 2024 and sell it today you would lose (4.00) from holding Pfizer Inc or give up 0.15% of portfolio value over 90 days.

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

Pfizer Inc  vs.  NetSol Technologies

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. 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.

NetSol Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NetSol Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Pfizer and NetSol Technologies

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

The idea behind Pfizer Inc and NetSol Technologies 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.