Correlation Between Pfizer and Themes Transatlantic

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

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

Diversification Opportunities for Pfizer and Themes Transatlantic

-0.36

Correlation Coefficient

Pfizer  Themes Transatlantic

Very good diversification

The 3 months correlation between Pfizer and Themes is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Themes Transatlantic Defense in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Themes Transatlantic 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 Themes Transatlantic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Themes Transatlantic has no effect on the direction of Pfizer i.e., Pfizer and Themes Transatlantic go up and down completely randomly.

Pair Corralation between Pfizer and Themes Transatlantic

Considering the 90-day investment horizon Pfizer is expected to generate 10.49 times less return on investment than Themes Transatlantic. But when comparing it to its historical volatility, Pfizer Inc is 1.07 times less risky than Themes Transatlantic. It trades about 0.02 of its potential returns per unit of risk. Themes Transatlantic Defense is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,561  in Themes Transatlantic Defense on December 20, 2024 and sell it today you would earn a total of  413.00  from holding Themes Transatlantic Defense or generate 16.13% return on investment over 90 days.

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

Pfizer Inc  vs.  Themes Transatlantic Defense

Pfizer Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pfizer Inc are ranked lower than 1 (%) 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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Themes Transatlantic

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Themes Transatlantic Defense are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Themes Transatlantic displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pfizer and Themes Transatlantic

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

The idea behind Pfizer Inc and Themes Transatlantic Defense 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.