Correlation Between PFIZER and BBB Foods

Can any of the company-specific risk be diversified away by investing in both PFIZER and BBB Foods 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 BBB Foods 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 BBB Foods, you can compare the effects of market volatilities on PFIZER and BBB Foods 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 BBB Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of PFIZER and BBB Foods.

Diversification Opportunities for PFIZER and BBB Foods

0.32

Correlation Coefficient

PFIZER  BBB Foods

Weak diversification

The 3 months correlation between PFIZER and BBB is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding PFIZER INC 43 and BBB Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBB Foods 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 BBB Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBB Foods has no effect on the direction of PFIZER i.e., PFIZER and BBB Foods go up and down completely randomly.

Pair Corralation between PFIZER and BBB Foods

Assuming the 90 days trading horizon PFIZER INC 43 is expected to generate 0.32 times more return on investment than BBB Foods. However, PFIZER INC 43 is 3.14 times less risky than BBB Foods. It trades about -0.05 of its potential returns per unit of risk. BBB Foods is currently generating about -0.04 per unit of risk. If you would invest  8,823  in PFIZER INC 43 on October 23, 2024 and sell it today you would lose (190.00) from holding PFIZER INC 43 or give up 2.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	78.33%
Values	Daily Returns

PFIZER INC 43  vs.  BBB Foods

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.

BBB Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BBB Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with PFIZER and BBB Foods

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

The idea behind PFIZER INC 43 and BBB Foods 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.