Correlation Between PFIZER and Seadrill

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

Diversification Opportunities for PFIZER and Seadrill

0.11

Correlation Coefficient

PFIZER  Seadrill

Average diversification

The 3 months correlation between PFIZER and Seadrill is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding PFIZER INC 275 and Seadrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seadrill Limited 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 Seadrill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seadrill Limited has no effect on the direction of PFIZER i.e., PFIZER and Seadrill go up and down completely randomly.

Pair Corralation between PFIZER and Seadrill

Assuming the 90 days trading horizon PFIZER INC 275 is expected to generate 0.32 times more return on investment than Seadrill. However, PFIZER INC 275 is 3.16 times less risky than Seadrill. It trades about 0.01 of its potential returns per unit of risk. Seadrill Limited is currently generating about -0.2 per unit of risk. If you would invest  9,746  in PFIZER INC 275 on December 23, 2024 and sell it today you would earn a total of  41.00  from holding PFIZER INC 275 or generate 0.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

PFIZER INC 275  vs.  Seadrill Limited

PFIZER INC 275

Risk-Adjusted Performance

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.

Seadrill Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Seadrill Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with PFIZER and Seadrill

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

The idea behind PFIZER INC 275 and Seadrill Limited 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.