Correlation Between Biogen and Pfizer
Can any of the company-specific risk be diversified away by investing in both Biogen 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 Biogen and Pfizer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Biogen Inc and Pfizer Inc, you can compare the effects of market volatilities on Biogen 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 Biogen with a short position of Pfizer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biogen and Pfizer.
Diversification Opportunities for Biogen and Pfizer
Very poor diversification
The 3 months correlation between Biogen and Pfizer is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Biogen Inc and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc and Biogen 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 Biogen Inc 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 Biogen i.e., Biogen and Pfizer go up and down completely randomly.
Pair Corralation between Biogen and Pfizer
Given the investment horizon of 90 days Biogen Inc is expected to under-perform the Pfizer. But the stock apears to be less risky and, when comparing its historical volatility, Biogen Inc is 1.24 times less risky than Pfizer. The stock trades about -0.54 of its potential returns per unit of risk. The Pfizer Inc is currently generating about -0.23 of returns per unit of risk over similar time horizon. If you would invest 2,842 in Pfizer Inc on August 28, 2024 and sell it today you would lose (225.00) from holding Pfizer Inc or give up 7.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Biogen Inc vs. Pfizer Inc
Performance |
| Timeline |
| Biogen Inc |
| Pfizer Inc |
Biogen and Pfizer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Biogen and Pfizer
The main advantage of trading using opposite Biogen and Pfizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biogen 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.| Biogen vs. Bristol Myers Squibb | Biogen vs. AbbVie Inc | Biogen vs. Merck Company | Biogen vs. Gilead Sciences |
| Pfizer vs. Capricor Therapeutics | Pfizer vs. Soleno Therapeutics | Pfizer vs. Bio Path Holdings | Pfizer vs. Moleculin Biotech |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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