Correlation Between Pfizer and CareRx

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

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

Diversification Opportunities for Pfizer and CareRx

0.8

Correlation Coefficient

Pfizer  CareRx

Very poor diversification

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

Pair Corralation between Pfizer and CareRx

Considering the 90-day investment horizon Pfizer is expected to generate 18.34 times less return on investment than CareRx. But when comparing it to its historical volatility, Pfizer Inc is 1.89 times less risky than CareRx. It trades about 0.0 of its potential returns per unit of risk. CareRx is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  131.00  in CareRx on October 8, 2024 and sell it today you would earn a total of  9.00  from holding CareRx or generate 6.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.2%
Values	Daily Returns

Pfizer Inc  vs.  CareRx

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 abnormal 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.

CareRx

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CareRx has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Pfizer and CareRx

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

The idea behind Pfizer Inc and CareRx 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.