Correlation Between Pfizer and Organon

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

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

Diversification Opportunities for Pfizer and Organon

0.32

Correlation Coefficient

Pfizer  Organon

Weak diversification

The 3 months correlation between Pfizer and Organon is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Organon Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Organon 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 Organon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Organon has no effect on the direction of Pfizer i.e., Pfizer and Organon go up and down completely randomly.

Pair Corralation between Pfizer and Organon

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the Organon. But the stock apears to be less risky and, when comparing its historical volatility, Pfizer Inc is 2.31 times less risky than Organon. The stock trades about -0.05 of its potential returns per unit of risk. The Organon Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,438  in Organon Co on December 28, 2024 and sell it today you would earn a total of  33.00  from holding Organon Co or generate 2.29% return on investment over 90 days.

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

Pfizer Inc  vs.  Organon Co

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

Organon

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Organon Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Organon is not utilizing all of its potentials. The new stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Pfizer and Organon

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

The idea behind Pfizer Inc and Organon Co 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.