Correlation Between Pfizer and Baron Durable

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

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

Diversification Opportunities for Pfizer and Baron Durable

0.08

Correlation Coefficient

Pfizer  Baron Durable

Significant diversification

The 3 months correlation between Pfizer and Baron is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Baron Durable Advantage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Durable Advantage 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 Baron Durable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Durable Advantage has no effect on the direction of Pfizer i.e., Pfizer and Baron Durable go up and down completely randomly.

Pair Corralation between Pfizer and Baron Durable

Considering the 90-day investment horizon Pfizer Inc is expected to generate 0.97 times more return on investment than Baron Durable. However, Pfizer Inc is 1.03 times less risky than Baron Durable. It trades about -0.05 of its potential returns per unit of risk. Baron Durable Advantage is currently generating about -0.07 per unit of risk. If you would invest  2,599  in Pfizer Inc on December 28, 2024 and sell it today you would lose (98.00) from holding Pfizer Inc or give up 3.77% of portfolio value over 90 days.

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

Pfizer Inc  vs.  Baron Durable Advantage

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.

Baron Durable Advantage

Risk-Adjusted Performance

Very Weak

Over the last 90 days Baron Durable Advantage has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Baron Durable is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pfizer and Baron Durable

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

The idea behind Pfizer Inc and Baron Durable Advantage 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.