Correlation Between Pfizer and North Peak

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

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

Diversification Opportunities for Pfizer and North Peak

0.8

Correlation Coefficient

Pfizer  North Peak

Very poor diversification

The 3 months correlation between Pfizer and North is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and North Peak Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Peak Resources 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 North Peak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Peak Resources has no effect on the direction of Pfizer i.e., Pfizer and North Peak go up and down completely randomly.

Pair Corralation between Pfizer and North Peak

Considering the 90-day investment horizon Pfizer Inc is expected to generate 0.21 times more return on investment than North Peak. However, Pfizer Inc is 4.75 times less risky than North Peak. It trades about -0.13 of its potential returns per unit of risk. North Peak Resources is currently generating about -0.05 per unit of risk. If you would invest  2,871  in Pfizer Inc on September 12, 2024 and sell it today you would lose (347.00) from holding Pfizer Inc or give up 12.09% of portfolio value over 90 days.

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

Pfizer Inc  vs.  North Peak Resources

Pfizer Inc

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

North Peak Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days North Peak Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Pfizer and North Peak

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

The idea behind Pfizer Inc and North Peak Resources 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.