Correlation Between PFIZER and Eldorado Gold

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

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

Diversification Opportunities for PFIZER and Eldorado Gold

0.48

Correlation Coefficient

PFIZER  Eldorado Gold

Very weak diversification

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

Pair Corralation between PFIZER and Eldorado Gold

Assuming the 90 days trading horizon PFIZER INC is expected to generate 0.16 times more return on investment than Eldorado Gold. However, PFIZER INC is 6.12 times less risky than Eldorado Gold. It trades about -0.32 of its potential returns per unit of risk. Eldorado Gold Corp is currently generating about -0.07 per unit of risk. If you would invest  9,039  in PFIZER INC on September 27, 2024 and sell it today you would lose (222.00) from holding PFIZER INC or give up 2.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

PFIZER INC  vs.  Eldorado Gold Corp

PFIZER INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PFIZER INC 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.

Eldorado Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eldorado Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with PFIZER and Eldorado Gold

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

The idea behind PFIZER INC and Eldorado Gold Corp 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.