Correlation Between International Consolidated and Pfizer
Can any of the company-specific risk be diversified away by investing in both International Consolidated 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 International Consolidated and Pfizer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Consolidated Airlines and Pfizer Inc, you can compare the effects of market volatilities on International Consolidated 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 International Consolidated with a short position of Pfizer. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Consolidated and Pfizer.
Diversification Opportunities for International Consolidated and Pfizer
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between International and Pfizer is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Air and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc and International Consolidated 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 International Consolidated Airlines 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 International Consolidated i.e., International Consolidated and Pfizer go up and down completely randomly.
Pair Corralation between International Consolidated and Pfizer
Assuming the 90 days horizon International Consolidated Airlines is expected to generate 1.69 times more return on investment than Pfizer. However, International Consolidated is 1.69 times more volatile than Pfizer Inc. It trades about 0.07 of its potential returns per unit of risk. Pfizer Inc is currently generating about 0.04 per unit of risk. If you would invest 380.00 in International Consolidated Airlines on November 28, 2024 and sell it today you would earn a total of 10.00 from holding International Consolidated Airlines or generate 2.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Consolidated Air vs. Pfizer Inc
Performance |
| Timeline |
| International Consolidated |
| Pfizer Inc |
International Consolidated and Pfizer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Consolidated and Pfizer
The main advantage of trading using opposite International Consolidated and Pfizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Consolidated 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 International Consolidated Airlines 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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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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