Correlation Between Pfizer and Western Asset

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

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

Diversification Opportunities for Pfizer and Western Asset

0.06

Correlation Coefficient

Pfizer  Western Asset

Significant diversification

The 3 months correlation between Pfizer and Western is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Western Asset Smash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Smash 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Smash has no effect on the direction of Pfizer i.e., Pfizer and Western Asset go up and down completely randomly.

Pair Corralation between Pfizer and Western Asset

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the Western Asset. In addition to that, Pfizer is 3.35 times more volatile than Western Asset Smash. It trades about -0.05 of its total potential returns per unit of risk. Western Asset Smash is currently generating about 0.06 per unit of volatility. If you would invest  610.00  in Western Asset Smash on December 29, 2024 and sell it today you would earn a total of  8.00  from holding Western Asset Smash or generate 1.31% return on investment over 90 days.

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

Pfizer Inc  vs.  Western Asset Smash

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.

Western Asset Smash

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Smash are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Western Asset 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 Western Asset

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

The idea behind Pfizer Inc and Western Asset Smash 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.