Correlation Between Pfizer and Teucrium Soybean

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

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

Diversification Opportunities for Pfizer and Teucrium Soybean

0.63

Correlation Coefficient

Pfizer  Teucrium Soybean

Poor diversification

The 3 months correlation between Pfizer and Teucrium is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Teucrium Soybean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teucrium Soybean 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 Teucrium Soybean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teucrium Soybean has no effect on the direction of Pfizer i.e., Pfizer and Teucrium Soybean go up and down completely randomly.

Pair Corralation between Pfizer and Teucrium Soybean

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the Teucrium Soybean. In addition to that, Pfizer is 1.67 times more volatile than Teucrium Soybean. It trades about -0.15 of its total potential returns per unit of risk. Teucrium Soybean is currently generating about -0.09 per unit of volatility. If you would invest  2,213  in Teucrium Soybean on September 17, 2024 and sell it today you would lose (104.00) from holding Teucrium Soybean or give up 4.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Pfizer Inc  vs.  Teucrium Soybean

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 uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Teucrium Soybean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teucrium Soybean has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Teucrium Soybean is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pfizer and Teucrium Soybean

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

The idea behind Pfizer Inc and Teucrium Soybean 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.