Correlation Between Palmer Square and PFIZER

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

By analyzing existing cross correlation between Palmer Square Ultra Short and PFIZER INC, you can compare the effects of market volatilities on Palmer Square 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 Palmer Square with a short position of PFIZER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palmer Square and PFIZER.

Diversification Opportunities for Palmer Square and PFIZER

-0.76

Correlation Coefficient

Palmer Square  PFIZER

Pay attention - limited upside

The 3 months correlation between Palmer and PFIZER is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Palmer Square Ultra Short and PFIZER INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PFIZER INC and Palmer Square 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 Palmer Square Ultra Short 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 has no effect on the direction of Palmer Square i.e., Palmer Square and PFIZER go up and down completely randomly.

Pair Corralation between Palmer Square and PFIZER

Assuming the 90 days horizon Palmer Square Ultra Short is expected to generate 0.03 times more return on investment than PFIZER. However, Palmer Square Ultra Short is 32.52 times less risky than PFIZER. It trades about 0.53 of its potential returns per unit of risk. PFIZER INC is currently generating about -0.04 per unit of risk. If you would invest  2,005  in Palmer Square Ultra Short on September 24, 2024 and sell it today you would earn a total of  6.00  from holding Palmer Square Ultra Short or generate 0.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Palmer Square Ultra Short  vs.  PFIZER INC

Palmer Square Ultra

Risk-Adjusted Performance

56 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in Palmer Square Ultra Short are ranked lower than 56 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Palmer Square is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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. Despite somewhat strong basic indicators, PFIZER is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Palmer Square and PFIZER

The main advantage of trading using opposite Palmer Square and PFIZER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palmer Square 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 Palmer Square Ultra Short and PFIZER INC 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.

Check out your portfolio center.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.