Correlation Between Pfizer and Optimize Strategy

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

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

Diversification Opportunities for Pfizer and Optimize Strategy

0.08

Correlation Coefficient

Pfizer  Optimize Strategy

Significant diversification

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

Pair Corralation between Pfizer and Optimize Strategy

Considering the 90-day investment horizon Pfizer Inc is expected to generate 1.0 times more return on investment than Optimize Strategy. However, Pfizer Inc is 1.0 times less risky than Optimize Strategy. It trades about -0.05 of its potential returns per unit of risk. Optimize Strategy Index is currently generating about -0.09 per unit of risk. If you would invest  2,599  in Pfizer Inc on December 29, 2024 and sell it today you would lose (98.00) from holding Pfizer Inc or give up 3.77% of portfolio value over 90 days.

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

Pfizer Inc  vs.  Optimize Strategy Index

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.

Optimize Strategy Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days Optimize Strategy Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with Pfizer and Optimize Strategy

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

The idea behind Pfizer Inc and Optimize Strategy Index 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.