Correlation Between Scotiabank Peru and Pfizer

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

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

Diversification Opportunities for Scotiabank Peru and Pfizer

0.82

Correlation Coefficient

Scotiabank Peru  Pfizer

Very poor diversification

The 3 months correlation between Scotiabank and Pfizer is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Scotiabank Peru SAA and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc and Scotiabank Peru 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 Scotiabank Peru SAA 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 Scotiabank Peru i.e., Scotiabank Peru and Pfizer go up and down completely randomly.

Pair Corralation between Scotiabank Peru and Pfizer

Assuming the 90 days trading horizon Scotiabank Peru SAA is expected to generate 1.68 times more return on investment than Pfizer. However, Scotiabank Peru is 1.68 times more volatile than Pfizer Inc. It trades about 0.53 of its potential returns per unit of risk. Pfizer Inc is currently generating about 0.29 per unit of risk. If you would invest  1,030  in Scotiabank Peru SAA on October 10, 2024 and sell it today you would earn a total of  120.00  from holding Scotiabank Peru SAA or generate 11.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	57.14%
Values	Daily Returns

Scotiabank Peru SAA  vs.  Pfizer Inc

Scotiabank Peru SAA

Risk-Adjusted Performance

39 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Scotiabank Peru SAA are ranked lower than 39 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Scotiabank Peru exhibited solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of very healthy primary indicators, Pfizer is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Scotiabank Peru and Pfizer

The main advantage of trading using opposite Scotiabank Peru and Pfizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scotiabank Peru 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 Scotiabank Peru SAA 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.

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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.