Correlation Between Pfizer and FT Cboe

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

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

Diversification Opportunities for Pfizer and FT Cboe

0.1

Correlation Coefficient

Pfizer  FT Cboe

Average diversification

The 3 months correlation between Pfizer and XOCT is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and FT Cboe Vest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Cboe Vest 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 FT Cboe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Cboe Vest has no effect on the direction of Pfizer i.e., Pfizer and FT Cboe go up and down completely randomly.

Pair Corralation between Pfizer and FT Cboe

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the FT Cboe. In addition to that, Pfizer is 2.58 times more volatile than FT Cboe Vest. It trades about -0.05 of its total potential returns per unit of risk. FT Cboe Vest is currently generating about -0.02 per unit of volatility. If you would invest  3,429  in FT Cboe Vest on December 28, 2024 and sell it today you would lose (18.00) from holding FT Cboe Vest or give up 0.52% of portfolio value over 90 days.

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

Pfizer Inc  vs.  FT Cboe Vest

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

FT Cboe Vest

Risk-Adjusted Performance

Very Weak

Over the last 90 days FT Cboe Vest has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, FT Cboe is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Pfizer and FT Cboe

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

The idea behind Pfizer Inc and FT Cboe Vest 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.