Correlation Between Pfizer and NuVista Energy

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

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

Diversification Opportunities for Pfizer and NuVista Energy

-0.08

Correlation Coefficient

Pfizer  NuVista Energy

Good diversification

The 3 months correlation between Pfizer and NuVista is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and NuVista Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NuVista Energy 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 NuVista Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NuVista Energy has no effect on the direction of Pfizer i.e., Pfizer and NuVista Energy go up and down completely randomly.

Pair Corralation between Pfizer and NuVista Energy

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the NuVista Energy. But the stock apears to be less risky and, when comparing its historical volatility, Pfizer Inc is 1.93 times less risky than NuVista Energy. The stock trades about -0.05 of its potential returns per unit of risk. The NuVista Energy is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  946.00  in NuVista Energy on December 29, 2024 and sell it today you would earn a total of  4.00  from holding NuVista Energy or generate 0.42% 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.  NuVista Energy

Pfizer Inc

Risk-Adjusted Performance

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

NuVista Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NuVista Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NuVista Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Pfizer and NuVista Energy

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

The idea behind Pfizer Inc and NuVista Energy 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.