Correlation Between Pfizer and PetIQ

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

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

Diversification Opportunities for Pfizer and PetIQ

-0.72

Correlation Coefficient

Pfizer  PetIQ

Pay attention - limited upside

The 3 months correlation between Pfizer and PetIQ is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and PetIQ Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetIQ Inc 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 PetIQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetIQ Inc has no effect on the direction of Pfizer i.e., Pfizer and PetIQ go up and down completely randomly.

Pair Corralation between Pfizer and PetIQ

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the PetIQ. In addition to that, Pfizer is 78.7 times more volatile than PetIQ Inc. It trades about -0.08 of its total potential returns per unit of risk. PetIQ Inc is currently generating about -0.58 per unit of volatility. If you would invest  3,099  in PetIQ Inc on October 23, 2024 and sell it today you would lose (1.00) from holding PetIQ Inc or give up 0.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	5.0%
Values	Daily Returns

Pfizer Inc  vs.  PetIQ Inc

Pfizer Inc

Risk-Adjusted Performance

0 of 100

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 latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

PetIQ Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PetIQ Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, PetIQ is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Pfizer and PetIQ

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

The idea behind Pfizer Inc and PetIQ Inc 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.