Correlation Between Pfizer and Innovator Equity

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

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

Diversification Opportunities for Pfizer and Innovator Equity

0.08

Correlation Coefficient

Pfizer  Innovator Equity

Significant diversification

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

Pair Corralation between Pfizer and Innovator Equity

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the Innovator Equity. In addition to that, Pfizer is 2.21 times more volatile than Innovator Equity Power. It trades about -0.05 of its total potential returns per unit of risk. Innovator Equity Power is currently generating about -0.03 per unit of volatility. If you would invest  3,854  in Innovator Equity Power on December 29, 2024 and sell it today you would lose (45.00) from holding Innovator Equity Power or give up 1.17% 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.  Innovator Equity Power

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.

Innovator Equity Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days Innovator Equity Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Innovator Equity is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Pfizer and Innovator Equity

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

The idea behind Pfizer Inc and Innovator Equity Power 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.