Correlation Between PFIZER and Contango ORE

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

By analyzing existing cross correlation between PFIZER INC 4125 and Contango ORE, you can compare the effects of market volatilities on PFIZER and Contango ORE 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 Contango ORE. Check out your portfolio center. Please also check ongoing floating volatility patterns of PFIZER and Contango ORE.

Diversification Opportunities for PFIZER and Contango ORE

-0.37

Correlation Coefficient

PFIZER  Contango ORE

Very good diversification

The 3 months correlation between PFIZER and Contango is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding PFIZER INC 4125 and Contango ORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Contango ORE 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 4125 are associated (or correlated) with Contango ORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Contango ORE has no effect on the direction of PFIZER i.e., PFIZER and Contango ORE go up and down completely randomly.

Pair Corralation between PFIZER and Contango ORE

Assuming the 90 days trading horizon PFIZER INC 4125 is expected to generate 0.44 times more return on investment than Contango ORE. However, PFIZER INC 4125 is 2.27 times less risky than Contango ORE. It trades about 0.15 of its potential returns per unit of risk. Contango ORE is currently generating about 0.0 per unit of risk. If you would invest  8,029  in PFIZER INC 4125 on December 24, 2024 and sell it today you would earn a total of  1,200  from holding PFIZER INC 4125 or generate 14.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

PFIZER INC 4125  vs.  Contango ORE

PFIZER INC 4125

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PFIZER INC 4125 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, PFIZER sustained solid returns over the last few months and may actually be approaching a breakup point.

Contango ORE

Risk-Adjusted Performance

Very Weak

Over the last 90 days Contango ORE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Contango ORE is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with PFIZER and Contango ORE

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

The idea behind PFIZER INC 4125 and Contango ORE 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.