Correlation Between Pfizer and AstraZeneca PLC

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

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

Diversification Opportunities for Pfizer and AstraZeneca PLC

-0.12

Correlation Coefficient

Pfizer  AstraZeneca PLC

Good diversification

The 3 months correlation between Pfizer and AstraZeneca is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and AstraZeneca PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC ADR 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 AstraZeneca PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AstraZeneca PLC ADR has no effect on the direction of Pfizer i.e., Pfizer and AstraZeneca PLC go up and down completely randomly.

Pair Corralation between Pfizer and AstraZeneca PLC

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the AstraZeneca PLC. In addition to that, Pfizer is 1.03 times more volatile than AstraZeneca PLC ADR. It trades about -0.04 of its total potential returns per unit of risk. AstraZeneca PLC ADR is currently generating about 0.19 per unit of volatility. If you would invest  6,466  in AstraZeneca PLC ADR on December 30, 2024 and sell it today you would earn a total of  913.00  from holding AstraZeneca PLC ADR or generate 14.12% return on investment over 90 days.

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

Pfizer Inc  vs.  AstraZeneca PLC ADR

Pfizer Inc

Risk-Adjusted Performance

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 rather sound technical and fundamental indicators, Pfizer is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

AstraZeneca PLC ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AstraZeneca PLC ADR are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, AstraZeneca PLC displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pfizer and AstraZeneca PLC

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

The idea behind Pfizer Inc and AstraZeneca PLC ADR 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.