Correlation Between Pfizer and Franklin Liberty

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

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

Diversification Opportunities for Pfizer and Franklin Liberty

-0.33

Correlation Coefficient

Pfizer  Franklin Liberty

Very good diversification

The 3 months correlation between Pfizer and Franklin is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Franklin Liberty International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty Int 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 Franklin Liberty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Liberty Int has no effect on the direction of Pfizer i.e., Pfizer and Franklin Liberty go up and down completely randomly.

Pair Corralation between Pfizer and Franklin Liberty

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the Franklin Liberty. In addition to that, Pfizer is 4.54 times more volatile than Franklin Liberty International. It trades about -0.07 of its total potential returns per unit of risk. Franklin Liberty International is currently generating about 0.06 per unit of volatility. If you would invest  1,849  in Franklin Liberty International on September 18, 2024 and sell it today you would earn a total of  174.00  from holding Franklin Liberty International or generate 9.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Pfizer Inc  vs.  Franklin Liberty International

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 uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Franklin Liberty Int

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Liberty International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, Franklin Liberty 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 Franklin Liberty

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

The idea behind Pfizer Inc and Franklin Liberty International 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.