Correlation Between Pfizer and Clarke

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

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

Diversification Opportunities for Pfizer and Clarke

0.83

Correlation Coefficient

Pfizer  Clarke

Very poor diversification

The 3 months correlation between Pfizer and Clarke is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc CDR and Clarke Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clarke Inc 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 CDR are associated (or correlated) with Clarke. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clarke Inc has no effect on the direction of Pfizer i.e., Pfizer and Clarke go up and down completely randomly.

Pair Corralation between Pfizer and Clarke

Assuming the 90 days trading horizon Pfizer is expected to generate 193.75 times less return on investment than Clarke. But when comparing it to its historical volatility, Pfizer Inc CDR is 1.36 times less risky than Clarke. It trades about 0.0 of its potential returns per unit of risk. Clarke Inc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,390  in Clarke Inc on October 7, 2024 and sell it today you would earn a total of  970.00  from holding Clarke Inc or generate 69.78% return on investment over 90 days.

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

Pfizer Inc CDR  vs.  Clarke Inc

Pfizer Inc CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pfizer Inc CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Clarke Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clarke Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Clarke is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Pfizer and Clarke

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

The idea behind Pfizer Inc CDR and Clarke 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.