Correlation Between Exxon and Pfizer

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

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

Diversification Opportunities for Exxon and Pfizer

-0.09

Correlation Coefficient

Exxon  Pfizer

Good diversification

The 3 months correlation between Exxon and Pfizer is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc and Exxon 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 Exxon Mobil Corp 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 Exxon i.e., Exxon and Pfizer go up and down completely randomly.

Pair Corralation between Exxon and Pfizer

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 1.2 times more return on investment than Pfizer. However, Exxon is 1.2 times more volatile than Pfizer Inc. It trades about 0.12 of its potential returns per unit of risk. Pfizer Inc is currently generating about 0.02 per unit of risk. If you would invest  10,493  in Exxon Mobil Corp on December 20, 2024 and sell it today you would earn a total of  1,048  from holding Exxon Mobil Corp or generate 9.99% return on investment over 90 days.

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

Exxon Mobil Corp  vs.  Pfizer Inc

Exxon Mobil Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Exxon may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pfizer Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pfizer Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Pfizer is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Exxon and Pfizer

The main advantage of trading using opposite Exxon and Pfizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon 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 Exxon Mobil Corp 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.