Correlation Between Pfizer and AMERICAN

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

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

Diversification Opportunities for Pfizer and AMERICAN

0.03

Correlation Coefficient

Pfizer  AMERICAN

Significant diversification

The 3 months correlation between Pfizer and AMERICAN is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and AMERICAN TOWER P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERICAN TOWER P 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 AMERICAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMERICAN TOWER P has no effect on the direction of Pfizer i.e., Pfizer and AMERICAN go up and down completely randomly.

Pair Corralation between Pfizer and AMERICAN

Considering the 90-day investment horizon Pfizer Inc is expected to generate 3.15 times more return on investment than AMERICAN. However, Pfizer is 3.15 times more volatile than AMERICAN TOWER P. It trades about 0.01 of its potential returns per unit of risk. AMERICAN TOWER P is currently generating about -0.03 per unit of risk. If you would invest  2,629  in Pfizer Inc on October 24, 2024 and sell it today you would earn a total of  11.50  from holding Pfizer Inc or generate 0.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.55%
Values	Daily Returns

Pfizer Inc  vs.  AMERICAN TOWER P

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 unsteady 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.

AMERICAN TOWER P

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Pfizer and AMERICAN

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

The idea behind Pfizer Inc and AMERICAN TOWER P 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.