Correlation Between PFIZER and NETGEAR

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

Diversification Opportunities for PFIZER and NETGEAR

-0.48

Correlation Coefficient

PFIZER  NETGEAR

Very good diversification

The 3 months correlation between PFIZER and NETGEAR is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding PFIZER INC 275 and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of PFIZER i.e., PFIZER and NETGEAR go up and down completely randomly.

Pair Corralation between PFIZER and NETGEAR

Assuming the 90 days trading horizon PFIZER INC 275 is expected to under-perform the NETGEAR. But the bond apears to be less risky and, when comparing its historical volatility, PFIZER INC 275 is 4.69 times less risky than NETGEAR. The bond trades about -0.18 of its potential returns per unit of risk. The NETGEAR is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,523  in NETGEAR on October 12, 2024 and sell it today you would earn a total of  172.00  from holding NETGEAR or generate 6.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

PFIZER INC 275  vs.  NETGEAR

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 recent stock price disturbance, may contribute to short-term losses for the investors.

NETGEAR

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PFIZER and NETGEAR

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

The idea behind PFIZER INC 275 and NETGEAR 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.