Correlation Between PFIZER and Digi International

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

By analyzing existing cross correlation between PFIZER INC 275 and Digi International, you can compare the effects of market volatilities on PFIZER and Digi International 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 Digi International. Check out your portfolio center. Please also check ongoing floating volatility patterns of PFIZER and Digi International.

Diversification Opportunities for PFIZER and Digi International

0.32

Correlation Coefficient

PFIZER  Digi International

Weak diversification

The 3 months correlation between PFIZER and Digi is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding PFIZER INC 275 and Digi International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digi International 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 275 are associated (or correlated) with Digi International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digi International has no effect on the direction of PFIZER i.e., PFIZER and Digi International go up and down completely randomly.

Pair Corralation between PFIZER and Digi International

Assuming the 90 days trading horizon PFIZER is expected to generate 5.38 times less return on investment than Digi International. But when comparing it to its historical volatility, PFIZER INC 275 is 9.93 times less risky than Digi International. It trades about 0.01 of its potential returns per unit of risk. Digi International is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,584  in Digi International on October 26, 2024 and sell it today you would lose (382.00) from holding Digi International or give up 10.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

PFIZER INC 275  vs.  Digi International

PFIZER INC 275

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PFIZER INC 275 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.

Digi International

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Digi International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting forward indicators, Digi International may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with PFIZER and Digi International

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

The idea behind PFIZER INC 275 and Digi International 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.