Correlation Between Vale SA and Pfizer

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

By analyzing existing cross correlation between Vale SA and Pfizer Inc, you can compare the effects of market volatilities on Vale SA and Pfizer 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 Vale SA with a short position of Pfizer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Pfizer.

Diversification Opportunities for Vale SA and Pfizer

-0.23

Correlation Coefficient

Vale SA  Pfizer

Very good diversification

The 3 months correlation between Vale and Pfizer is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc and Vale SA 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 Vale SA are associated (or correlated) with Pfizer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pfizer Inc has no effect on the direction of Vale SA i.e., Vale SA and Pfizer go up and down completely randomly.

Pair Corralation between Vale SA and Pfizer

Assuming the 90 days trading horizon Vale SA is expected to generate 1.51 times more return on investment than Pfizer. However, Vale SA is 1.51 times more volatile than Pfizer Inc. It trades about 0.21 of its potential returns per unit of risk. Pfizer Inc is currently generating about 0.13 per unit of risk. If you would invest  520,000  in Vale SA on December 20, 2024 and sell it today you would earn a total of  138,000  from holding Vale SA or generate 26.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Vale SA  vs.  Pfizer Inc

Vale SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vale SA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Vale SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pfizer Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pfizer Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Pfizer may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Vale SA and Pfizer

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

The idea behind Vale SA and Pfizer Inc 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.