Correlation Between Postmedia Network and Pfizer

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

By analyzing existing cross correlation between Postmedia Network Canada and Pfizer Inc CDR, you can compare the effects of market volatilities on Postmedia Network and Pfizer 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 Postmedia Network with a short position of Pfizer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Postmedia Network and Pfizer.

Diversification Opportunities for Postmedia Network and Pfizer

0.5

Correlation Coefficient

Postmedia Network  Pfizer

Very weak diversification

The 3 months correlation between Postmedia and Pfizer is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Postmedia Network Canada and Pfizer Inc CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc CDR and Postmedia Network 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 Postmedia Network Canada are associated (or correlated) with Pfizer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pfizer Inc CDR has no effect on the direction of Postmedia Network i.e., Postmedia Network and Pfizer go up and down completely randomly.

Pair Corralation between Postmedia Network and Pfizer

Assuming the 90 days trading horizon Postmedia Network Canada is expected to under-perform the Pfizer. In addition to that, Postmedia Network is 1.56 times more volatile than Pfizer Inc CDR. It trades about 0.0 of its total potential returns per unit of risk. Pfizer Inc CDR is currently generating about 0.13 per unit of volatility. If you would invest  1,168  in Pfizer Inc CDR on September 22, 2024 and sell it today you would earn a total of  54.00  from holding Pfizer Inc CDR or generate 4.62% return on investment over 90 days.

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

Postmedia Network Canada  vs.  Pfizer Inc CDR

Postmedia Network Canada

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pfizer Inc CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pfizer Inc CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Postmedia Network and Pfizer

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

The idea behind Postmedia Network Canada and Pfizer Inc CDR 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.