Correlation Between Pfizer and Wahed FTSE

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

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

Diversification Opportunities for Pfizer and Wahed FTSE

-0.5

Correlation Coefficient

Pfizer  Wahed FTSE

Very good diversification

The 3 months correlation between Pfizer and Wahed is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Wahed FTSE USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wahed FTSE USA 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 Wahed FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wahed FTSE USA has no effect on the direction of Pfizer i.e., Pfizer and Wahed FTSE go up and down completely randomly.

Pair Corralation between Pfizer and Wahed FTSE

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the Wahed FTSE. In addition to that, Pfizer is 1.82 times more volatile than Wahed FTSE USA. It trades about -0.06 of its total potential returns per unit of risk. Wahed FTSE USA is currently generating about 0.13 per unit of volatility. If you would invest  4,997  in Wahed FTSE USA on September 2, 2024 and sell it today you would earn a total of  328.00  from holding Wahed FTSE USA or generate 6.56% return on investment over 90 days.

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

Pfizer Inc  vs.  Wahed FTSE USA

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 rather sound technical and fundamental indicators, Pfizer is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Wahed FTSE USA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wahed FTSE USA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Wahed FTSE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Pfizer and Wahed FTSE

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

The idea behind Pfizer Inc and Wahed FTSE USA 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.