Correlation Between Pfizer and Eton Pharmaceuticals

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

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

Diversification Opportunities for Pfizer and Eton Pharmaceuticals

-0.73

Correlation Coefficient

Pfizer  Eton Pharmaceuticals

Pay attention - limited upside

The 3 months correlation between Pfizer and Eton is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Eton Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eton Pharmaceuticals 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 Eton Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eton Pharmaceuticals has no effect on the direction of Pfizer i.e., Pfizer and Eton Pharmaceuticals go up and down completely randomly.

Pair Corralation between Pfizer and Eton Pharmaceuticals

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the Eton Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Pfizer Inc is 2.95 times less risky than Eton Pharmaceuticals. The stock trades about -0.08 of its potential returns per unit of risk. The Eton Pharmaceuticals is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  299.00  in Eton Pharmaceuticals on August 31, 2024 and sell it today you would earn a total of  975.00  from holding Eton Pharmaceuticals or generate 326.09% return on investment over 90 days.

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

Pfizer Inc  vs.  Eton Pharmaceuticals

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 sluggish 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.

Eton Pharmaceuticals

Risk-Adjusted Performance

33 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Eton Pharmaceuticals are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Eton Pharmaceuticals displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pfizer and Eton Pharmaceuticals

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

The idea behind Pfizer Inc and Eton Pharmaceuticals 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.