Correlation Between Pfizer and Short-term Investment

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

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

Diversification Opportunities for Pfizer and Short-term Investment

-0.04

Correlation Coefficient

Pfizer  Short-term Investment

Good diversification

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

Pair Corralation between Pfizer and Short-term Investment

Considering the 90-day investment horizon Pfizer is expected to generate 2.59 times less return on investment than Short-term Investment. In addition to that, Pfizer is 8.82 times more volatile than Short Term Investment Trust. It trades about 0.01 of its total potential returns per unit of risk. Short Term Investment Trust is currently generating about 0.13 per unit of volatility. If you would invest  99.00  in Short Term Investment Trust on December 23, 2024 and sell it today you would earn a total of  1.00  from holding Short Term Investment Trust or generate 1.01% return on investment over 90 days.

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

Pfizer Inc  vs.  Short Term Investment Trust

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Short Term Investment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Short Term Investment Trust are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Short-term Investment 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 Short-term Investment

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

The idea behind Pfizer Inc and Short Term Investment Trust 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.