Correlation Between Pfizer and North American

Can any of the company-specific risk be diversified away by investing in both Pfizer and North American 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 North American 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 North American Financial, you can compare the effects of market volatilities on Pfizer and North American 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 North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pfizer and North American.

Diversification Opportunities for Pfizer and North American

-0.88

Correlation Coefficient

Pfizer  North American

Pay attention - limited upside

The 3 months correlation between Pfizer and North is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc CDR and North American Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Financial 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Financial has no effect on the direction of Pfizer i.e., Pfizer and North American go up and down completely randomly.

Pair Corralation between Pfizer and North American

Assuming the 90 days trading horizon Pfizer Inc CDR is expected to generate 1.01 times more return on investment than North American. However, Pfizer is 1.01 times more volatile than North American Financial. It trades about 0.13 of its potential returns per unit of risk. North American Financial is currently generating about -0.17 per unit of risk. If you would invest  1,168  in Pfizer Inc CDR on September 22, 2024 and sell it today you would earn a total of  54.00  from holding Pfizer Inc CDR or generate 4.62% return on investment over 90 days.

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

Pfizer Inc CDR  vs.  North American Financial

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 unfluctuating 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.

North American Financial

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in North American Financial are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, North American displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pfizer and North American

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

The idea behind Pfizer Inc CDR and North American Financial 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.