Correlation Between Pfizer and Transamerica Mid

Can any of the company-specific risk be diversified away by investing in both Pfizer and Transamerica Mid 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 Mid 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 Mid Cap, you can compare the effects of market volatilities on Pfizer and Transamerica Mid 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 Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pfizer and Transamerica Mid.

Diversification Opportunities for Pfizer and Transamerica Mid

-0.7

Correlation Coefficient

Pfizer  Transamerica Mid

Excellent diversification

The 3 months correlation between Pfizer and Transamerica is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Transamerica Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Mid Cap 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 Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Mid Cap has no effect on the direction of Pfizer i.e., Pfizer and Transamerica Mid go up and down completely randomly.

Pair Corralation between Pfizer and Transamerica Mid

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the Transamerica Mid. In addition to that, Pfizer is 1.3 times more volatile than Transamerica Mid Cap. It trades about -0.06 of its total potential returns per unit of risk. Transamerica Mid Cap is currently generating about 0.06 per unit of volatility. If you would invest  710.00  in Transamerica Mid Cap on October 4, 2024 and sell it today you would earn a total of  263.00  from holding Transamerica Mid Cap or generate 37.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Pfizer Inc  vs.  Transamerica Mid Cap

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 rather sound technical and fundamental indicators, Pfizer is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Transamerica Mid Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transamerica Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Transamerica Mid 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 Mid

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

The idea behind Pfizer Inc and Transamerica Mid Cap 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.