Correlation Between Pfizer and Transamerica High

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

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

Diversification Opportunities for Pfizer and Transamerica High

-0.53

Correlation Coefficient

Pfizer  Transamerica High

Excellent diversification

The 3 months correlation between Pfizer and Transamerica is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Transamerica High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica High Yield 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 Transamerica High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica High Yield has no effect on the direction of Pfizer i.e., Pfizer and Transamerica High go up and down completely randomly.

Pair Corralation between Pfizer and Transamerica High

Considering the 90-day investment horizon Pfizer Inc is expected to generate 9.26 times more return on investment than Transamerica High. However, Pfizer is 9.26 times more volatile than Transamerica High Yield. It trades about 0.11 of its potential returns per unit of risk. Transamerica High Yield is currently generating about -0.34 per unit of risk. If you would invest  2,610  in Pfizer Inc on October 8, 2024 and sell it today you would earn a total of  79.00  from holding Pfizer Inc or generate 3.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Pfizer Inc  vs.  Transamerica High Yield

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 abnormal 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.

Transamerica High Yield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transamerica High Yield has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Transamerica High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pfizer and Transamerica High

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

The idea behind Pfizer Inc and Transamerica High Yield 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.