Correlation Between Microsoft and Pfizer
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Pfizer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Pfizer Inc, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Pfizer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Pfizer.
Diversification Opportunities for Microsoft and Pfizer
Average diversification
The 3 months correlation between Microsoft and Pfizer is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Pfizer go up and down completely randomly.
Pair Corralation between Microsoft and Pfizer
Given the investment horizon of 90 days Microsoft is expected to generate 0.83 times more return on investment than Pfizer. However, Microsoft is 1.21 times less risky than Pfizer. It trades about 0.05 of its potential returns per unit of risk. Pfizer Inc is currently generating about -0.27 per unit of risk. If you would invest 40,862 in Microsoft on August 31, 2024 and sell it today you would earn a total of 1,437 from holding Microsoft or generate 3.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.41% |
| Values | Daily Returns |
Microsoft vs. Pfizer Inc
Performance |
| Timeline |
| Microsoft |
| Pfizer Inc |
Microsoft and Pfizer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Pfizer
The main advantage of trading using opposite Microsoft and Pfizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Pfizer vs. Harmony Gold Mining | Pfizer vs. Agrometal SAI | Pfizer vs. United States Steel | Pfizer vs. Telecom Argentina |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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