Correlation Between Pfizer and Imperial Metals

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

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

Diversification Opportunities for Pfizer and Imperial Metals

0.64

Correlation Coefficient

Pfizer  Imperial Metals

Poor diversification

The 3 months correlation between Pfizer and Imperial is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Imperial Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Metals 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 Imperial Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Metals has no effect on the direction of Pfizer i.e., Pfizer and Imperial Metals go up and down completely randomly.

Pair Corralation between Pfizer and Imperial Metals

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the Imperial Metals. But the stock apears to be less risky and, when comparing its historical volatility, Pfizer Inc is 2.09 times less risky than Imperial Metals. The stock trades about -0.07 of its potential returns per unit of risk. The Imperial Metals is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  132.00  in Imperial Metals on September 20, 2024 and sell it today you would earn a total of  4.00  from holding Imperial Metals or generate 3.03% return on investment over 90 days.

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

Pfizer Inc  vs.  Imperial Metals

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 uncertain 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.

Imperial Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Imperial Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's essential 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 Imperial Metals

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

The idea behind Pfizer Inc and Imperial Metals 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.