Correlation Between GSK Plc and Pfizer
Can any of the company-specific risk be diversified away by investing in both GSK Plc 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 GSK Plc and Pfizer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GSK plc and Pfizer Inc, you can compare the effects of market volatilities on GSK Plc 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 GSK Plc with a short position of Pfizer. Check out your portfolio center. Please also check ongoing floating volatility patterns of GSK Plc and Pfizer.
Diversification Opportunities for GSK Plc and Pfizer
Poor diversification
The 3 months correlation between GSK and Pfizer is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding GSK plc and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc and GSK Plc 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 GSK plc 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 GSK Plc i.e., GSK Plc and Pfizer go up and down completely randomly.
Pair Corralation between GSK Plc and Pfizer
Assuming the 90 days horizon GSK plc is expected to generate 1.99 times more return on investment than Pfizer. However, GSK Plc is 1.99 times more volatile than Pfizer Inc. It trades about -0.11 of its potential returns per unit of risk. Pfizer Inc is currently generating about -0.28 per unit of risk. If you would invest 1,841 in GSK plc on August 24, 2024 and sell it today you would lose (147.00) from holding GSK plc or give up 7.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 91.3% |
| Values | Daily Returns |
GSK plc vs. Pfizer Inc
Performance |
| Timeline |
| GSK plc |
| Pfizer Inc |
GSK Plc and Pfizer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GSK Plc and Pfizer
The main advantage of trading using opposite GSK Plc and Pfizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GSK Plc 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.| GSK Plc vs. Santen Pharmaceutical Co | GSK Plc vs. Ono Pharmaceutical Co | GSK Plc vs. Grifols SA ADR | GSK Plc vs. Pfizer Inc |
| Pfizer vs. Merck Company | Pfizer vs. Johnson Johnson | Pfizer vs. Eshallgo Class A | Pfizer vs. Amtech Systems |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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