Correlation Between American Express and Pfizer
Can any of the company-specific risk be diversified away by investing in both American Express 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 American Express and Pfizer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express Co and Pfizer Inc, you can compare the effects of market volatilities on American Express 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 American Express with a short position of Pfizer. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Pfizer.
Diversification Opportunities for American Express and Pfizer
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between American and Pfizer is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding American Express Co and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc and American Express 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 American Express Co 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 American Express i.e., American Express and Pfizer go up and down completely randomly.
Pair Corralation between American Express and Pfizer
Assuming the 90 days trading horizon American Express Co is expected to generate 1.44 times more return on investment than Pfizer. However, American Express is 1.44 times more volatile than Pfizer Inc. It trades about 0.23 of its potential returns per unit of risk. Pfizer Inc is currently generating about 0.04 per unit of risk. If you would invest 2,327,495 in American Express Co on November 2, 2024 and sell it today you would earn a total of 197,505 from holding American Express Co or generate 8.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express Co vs. Pfizer Inc
Performance |
| Timeline |
| American Express |
| Pfizer Inc |
American Express and Pfizer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Pfizer
The main advantage of trading using opposite American Express and Pfizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express 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.| American Express vs. International Business Machines | American Express vs. Transportadora de Gas | American Express vs. Agrometal SAI | American Express vs. Grimoldi SA |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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