Correlation Between Pfizer and Jazz Pharmaceuticals

Can any of the company-specific risk be diversified away by investing in both Pfizer and Jazz 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 Jazz 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 Jazz Pharmaceuticals PLC, you can compare the effects of market volatilities on Pfizer and Jazz 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 Jazz Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pfizer and Jazz Pharmaceuticals.

Diversification Opportunities for Pfizer and Jazz Pharmaceuticals

-0.68

Correlation Coefficient

Pfizer  Jazz Pharmaceuticals

Excellent diversification

The 3 months correlation between Pfizer and Jazz is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Jazz Pharmaceuticals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jazz Pharmaceuticals PLC 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 Jazz Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jazz Pharmaceuticals PLC has no effect on the direction of Pfizer i.e., Pfizer and Jazz Pharmaceuticals go up and down completely randomly.

Pair Corralation between Pfizer and Jazz Pharmaceuticals

Considering the 90-day investment horizon Pfizer is expected to generate 2.0 times less return on investment than Jazz Pharmaceuticals. But when comparing it to its historical volatility, Pfizer Inc is 1.21 times less risky than Jazz Pharmaceuticals. It trades about 0.0 of its potential returns per unit of risk. Jazz Pharmaceuticals PLC is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  12,314  in Jazz Pharmaceuticals PLC on October 20, 2024 and sell it today you would lose (196.00) from holding Jazz Pharmaceuticals PLC or give up 1.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

Pfizer Inc  vs.  Jazz Pharmaceuticals PLC

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.

Jazz Pharmaceuticals PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jazz Pharmaceuticals PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Jazz Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Pfizer and Jazz Pharmaceuticals

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

The idea behind Pfizer Inc and Jazz Pharmaceuticals PLC 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.