Correlation Between Pfizer and UPS CDR

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

Diversification Opportunities for Pfizer and UPS CDR

-0.24

Correlation Coefficient

Pfizer  UPS CDR

Very good diversification

The 3 months correlation between Pfizer and UPS is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc CDR and UPS CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UPS CDR 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 UPS CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UPS CDR has no effect on the direction of Pfizer i.e., Pfizer and UPS CDR go up and down completely randomly.

Pair Corralation between Pfizer and UPS CDR

Assuming the 90 days trading horizon Pfizer Inc CDR is expected to under-perform the UPS CDR. But the stock apears to be less risky and, when comparing its historical volatility, Pfizer Inc CDR is 1.11 times less risky than UPS CDR. The stock trades about -0.13 of its potential returns per unit of risk. The UPS CDR is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,664  in UPS CDR on September 12, 2024 and sell it today you would earn a total of  40.00  from holding UPS CDR or generate 2.4% return on investment over 90 days.

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

Pfizer Inc CDR  vs.  UPS CDR

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.

UPS CDR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UPS CDR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, UPS CDR is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Pfizer and UPS CDR

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

The idea behind Pfizer Inc CDR and UPS CDR 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.