Correlation Between Pfizer and Large Capitalization

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

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

Diversification Opportunities for Pfizer and Large Capitalization

0.04

Correlation Coefficient

Pfizer  Large Capitalization

Significant diversification

The 3 months correlation between Pfizer and Large is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Large Capitalization Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Capitalization 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 Large Capitalization. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Capitalization has no effect on the direction of Pfizer i.e., Pfizer and Large Capitalization go up and down completely randomly.

Pair Corralation between Pfizer and Large Capitalization

Considering the 90-day investment horizon Pfizer Inc is expected to generate 0.78 times more return on investment than Large Capitalization. However, Pfizer Inc is 1.29 times less risky than Large Capitalization. It trades about -0.05 of its potential returns per unit of risk. Large Capitalization Growth is currently generating about -0.07 per unit of risk. If you would invest  2,599  in Pfizer Inc on December 28, 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	98.36%
Values	Daily Returns

Pfizer Inc  vs.  Large Capitalization Growth

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.

Large Capitalization

Risk-Adjusted Performance

Very Weak

Over the last 90 days Large Capitalization Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Pfizer and Large Capitalization

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

The idea behind Pfizer Inc and Large Capitalization Growth 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..