Correlation Between LOWES and Pfizer

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

By analyzing existing cross correlation between LOWES INC 3375 and Pfizer Inc, you can compare the effects of market volatilities on LOWES 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 LOWES with a short position of Pfizer. Check out your portfolio center. Please also check ongoing floating volatility patterns of LOWES and Pfizer.

Diversification Opportunities for LOWES and Pfizer

0.56

Correlation Coefficient

LOWES  Pfizer

Very weak diversification

The 3 months correlation between LOWES and Pfizer is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding LOWES INC 3375 and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc and LOWES 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 LOWES INC 3375 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 LOWES i.e., LOWES and Pfizer go up and down completely randomly.

Pair Corralation between LOWES and Pfizer

Assuming the 90 days trading horizon LOWES INC 3375 is expected to generate 0.21 times more return on investment than Pfizer. However, LOWES INC 3375 is 4.77 times less risky than Pfizer. It trades about 0.0 of its potential returns per unit of risk. Pfizer Inc is currently generating about -0.12 per unit of risk. If you would invest  9,890  in LOWES INC 3375 on September 12, 2024 and sell it today you would earn a total of  3.00  from holding LOWES INC 3375 or generate 0.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

LOWES INC 3375  vs.  Pfizer Inc

LOWES INC 3375

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LOWES INC 3375 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LOWES 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. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with LOWES and Pfizer

The main advantage of trading using opposite LOWES and Pfizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LOWES 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 LOWES INC 3375 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.