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 PORATION, 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

0.02

Correlation Coefficient

Pfizer  AMERICAN

Significant diversification

The 3 months correlation between Pfizer and AMERICAN is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and AMERICAN TOWER PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERICAN TOWER PORATION 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 PORATION 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 under-perform the AMERICAN. But the stock apears to be less risky and, when comparing its historical volatility, Pfizer Inc is 32.49 times less risky than AMERICAN. The stock trades about -0.05 of its potential returns per unit of risk. The AMERICAN TOWER PORATION is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  8,299  in AMERICAN TOWER PORATION on October 24, 2024 and sell it today you would lose (261.00) from holding AMERICAN TOWER PORATION or give up 3.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.13%
Values	Daily Returns

Pfizer Inc  vs.  AMERICAN TOWER PORATION

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 PORATION

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AMERICAN TOWER PORATION has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for AMERICAN TOWER PORATION 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 PORATION 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.