Correlation Between PFIZER and Yuexiu Transport

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

By analyzing existing cross correlation between PFIZER INC 43 and Yuexiu Transport Infrastructure, you can compare the effects of market volatilities on PFIZER and Yuexiu Transport 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 Yuexiu Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of PFIZER and Yuexiu Transport.

Diversification Opportunities for PFIZER and Yuexiu Transport

-0.54

Correlation Coefficient

PFIZER  Yuexiu Transport

Excellent diversification

The 3 months correlation between PFIZER and Yuexiu is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding PFIZER INC 43 and Yuexiu Transport Infrastructur in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuexiu Transport Inf 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 43 are associated (or correlated) with Yuexiu Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuexiu Transport Inf has no effect on the direction of PFIZER i.e., PFIZER and Yuexiu Transport go up and down completely randomly.

Pair Corralation between PFIZER and Yuexiu Transport

Assuming the 90 days trading horizon PFIZER INC 43 is expected to generate 24.84 times more return on investment than Yuexiu Transport. However, PFIZER is 24.84 times more volatile than Yuexiu Transport Infrastructure. It trades about 0.06 of its potential returns per unit of risk. Yuexiu Transport Infrastructure is currently generating about 0.09 per unit of risk. If you would invest  9,395  in PFIZER INC 43 on September 24, 2024 and sell it today you would lose (762.00) from holding PFIZER INC 43 or give up 8.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	83.1%
Values	Daily Returns

PFIZER INC 43  vs.  Yuexiu Transport Infrastructur

PFIZER INC 43

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PFIZER INC 43 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 current stock price disturbance, may contribute to short-term losses for the investors.

Yuexiu Transport Inf

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yuexiu Transport Infrastructure are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Yuexiu Transport reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PFIZER and Yuexiu Transport

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

The idea behind PFIZER INC 43 and Yuexiu Transport Infrastructure 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.