Correlation Between Pfizer and Prothena Plc

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

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

Diversification Opportunities for Pfizer and Prothena Plc

0.74

Correlation Coefficient

Pfizer  Prothena Plc

Poor diversification

The 3 months correlation between Pfizer and Prothena is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Prothena plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prothena plc 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 Prothena Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prothena plc has no effect on the direction of Pfizer i.e., Pfizer and Prothena Plc go up and down completely randomly.

Pair Corralation between Pfizer and Prothena Plc

Considering the 90-day investment horizon Pfizer Inc is expected to generate 0.34 times more return on investment than Prothena Plc. However, Pfizer Inc is 2.92 times less risky than Prothena Plc. It trades about -0.07 of its potential returns per unit of risk. Prothena plc is currently generating about -0.04 per unit of risk. If you would invest  4,621  in Pfizer Inc on September 21, 2024 and sell it today you would lose (2,044) from holding Pfizer Inc or give up 44.23% of portfolio value over 90 days.

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

Pfizer Inc  vs.  Prothena plc

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 uncertain 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.

Prothena plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prothena plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Pfizer and Prothena Plc

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

The idea behind Pfizer Inc and Prothena plc 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.