Correlation Between Pfizer and Exxon

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

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

Diversification Opportunities for Pfizer and Exxon

-0.09

Correlation Coefficient

Pfizer  Exxon

Good diversification

The 3 months correlation between Pfizer and Exxon is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Exxon Mobil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil Corp 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 Exxon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil Corp has no effect on the direction of Pfizer i.e., Pfizer and Exxon go up and down completely randomly.

Pair Corralation between Pfizer and Exxon

Considering the 90-day investment horizon Pfizer is expected to generate 6.85 times less return on investment than Exxon. But when comparing it to its historical volatility, Pfizer Inc is 1.2 times less risky than Exxon. It trades about 0.02 of its potential returns per unit of risk. Exxon Mobil Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  10,493  in Exxon Mobil Corp on December 20, 2024 and sell it today you would earn a total of  1,048  from holding Exxon Mobil Corp or generate 9.99% return on investment over 90 days.

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

Pfizer Inc  vs.  Exxon Mobil Corp

Pfizer Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pfizer Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Exxon Mobil Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Exxon may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Pfizer and Exxon

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

The idea behind Pfizer Inc and Exxon Mobil Corp 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.