Correlation Between Pfizer and Kronos Bio

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

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

Diversification Opportunities for Pfizer and Kronos Bio

0.21

Correlation Coefficient

Pfizer  Kronos Bio

Modest diversification

The 3 months correlation between Pfizer and Kronos is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Kronos Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kronos Bio 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 Kronos Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kronos Bio has no effect on the direction of Pfizer i.e., Pfizer and Kronos Bio go up and down completely randomly.

Pair Corralation between Pfizer and Kronos Bio

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the Kronos Bio. But the stock apears to be less risky and, when comparing its historical volatility, Pfizer Inc is 2.27 times less risky than Kronos Bio. The stock trades about -0.02 of its potential returns per unit of risk. The Kronos Bio is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  100.00  in Kronos Bio on December 1, 2024 and sell it today you would lose (2.00) from holding Kronos Bio or give up 2.0% of portfolio value over 90 days.

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

Pfizer Inc  vs.  Kronos Bio

Pfizer Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pfizer Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Pfizer is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Kronos Bio

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kronos Bio are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Kronos Bio is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Pfizer and Kronos Bio

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

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