Correlation Between Pfizer and ABBOTT

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

By analyzing existing cross correlation between Pfizer Inc and ABBOTT LABS 53, you can compare the effects of market volatilities on Pfizer and ABBOTT 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 ABBOTT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pfizer and ABBOTT.

Diversification Opportunities for Pfizer and ABBOTT

0.4

Correlation Coefficient

Pfizer  ABBOTT

Very weak diversification

The 3 months correlation between Pfizer and ABBOTT is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and ABBOTT LABS 53 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABBOTT LABS 53 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 ABBOTT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABBOTT LABS 53 has no effect on the direction of Pfizer i.e., Pfizer and ABBOTT go up and down completely randomly.

Pair Corralation between Pfizer and ABBOTT

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the ABBOTT. In addition to that, Pfizer is 2.21 times more volatile than ABBOTT LABS 53. It trades about -0.08 of its total potential returns per unit of risk. ABBOTT LABS 53 is currently generating about -0.06 per unit of volatility. If you would invest  10,730  in ABBOTT LABS 53 on September 4, 2024 and sell it today you would lose (270.00) from holding ABBOTT LABS 53 or give up 2.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.75%
Values	Daily Returns

Pfizer Inc  vs.  ABBOTT LABS 53

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 weak 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.

ABBOTT LABS 53

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABBOTT LABS 53 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ABBOTT is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pfizer and ABBOTT

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

The idea behind Pfizer Inc and ABBOTT LABS 53 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.