Correlation Between PFIZER and Employers Holdings

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

By analyzing existing cross correlation between PFIZER INC 44 and Employers Holdings, you can compare the effects of market volatilities on PFIZER and Employers Holdings 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 Employers Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of PFIZER and Employers Holdings.

Diversification Opportunities for PFIZER and Employers Holdings

-0.05

Correlation Coefficient

PFIZER  Employers Holdings

Good diversification

The 3 months correlation between PFIZER and Employers is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding PFIZER INC 44 and Employers Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Employers Holdings 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 44 are associated (or correlated) with Employers Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Employers Holdings has no effect on the direction of PFIZER i.e., PFIZER and Employers Holdings go up and down completely randomly.

Pair Corralation between PFIZER and Employers Holdings

Assuming the 90 days trading horizon PFIZER INC 44 is expected to generate 2.18 times more return on investment than Employers Holdings. However, PFIZER is 2.18 times more volatile than Employers Holdings. It trades about 0.05 of its potential returns per unit of risk. Employers Holdings is currently generating about 0.09 per unit of risk. If you would invest  9,506  in PFIZER INC 44 on September 24, 2024 and sell it today you would earn a total of  3,413  from holding PFIZER INC 44 or generate 35.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.2%
Values	Daily Returns

PFIZER INC 44  vs.  Employers Holdings

PFIZER INC 44

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PFIZER INC 44 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, PFIZER sustained solid returns over the last few months and may actually be approaching a breakup point.

Employers Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Employers Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent forward indicators, Employers Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PFIZER and Employers Holdings

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

The idea behind PFIZER INC 44 and Employers Holdings 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.