Correlation Between Pfizer and Ternium SA

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Can any of the company-specific risk be diversified away by investing in both Pfizer and Ternium SA 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 Pfizer and Ternium SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pfizer Inc and Ternium SA DRC, you can compare the effects of market volatilities on Pfizer and Ternium SA 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 Pfizer with a short position of Ternium SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pfizer and Ternium SA.

Diversification Opportunities for Pfizer and Ternium SA

PfizerTerniumDiversified AwayPfizerTerniumDiversified Away100%
0.11
  Correlation Coefficient

Average diversification

The 3 months correlation between Pfizer and Ternium is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Ternium SA DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ternium SA DRC and Pfizer 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 Pfizer Inc are associated (or correlated) with Ternium SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ternium SA DRC has no effect on the direction of Pfizer i.e., Pfizer and Ternium SA go up and down completely randomly.

Pair Corralation between Pfizer and Ternium SA

Assuming the 90 days trading horizon Pfizer is expected to generate 1.18 times less return on investment than Ternium SA. In addition to that, Pfizer is 1.0 times more volatile than Ternium SA DRC. It trades about 0.02 of its total potential returns per unit of risk. Ternium SA DRC is currently generating about 0.03 per unit of volatility. If you would invest  824,650  in Ternium SA DRC on November 30, 2024 and sell it today you would earn a total of  63,350  from holding Ternium SA DRC or generate 7.68% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Pfizer Inc  vs.  Ternium SA DRC

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-50
JavaScript chart by amCharts 3.21.15PFE TXR
       Timeline  
Pfizer Inc 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Pfizer Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Pfizer sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15JanFebFeb6,8007,0007,2007,4007,6007,8008,0008,2008,400
Ternium SA DRC 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Ternium SA DRC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Ternium SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15JanFebFeb8,4008,6008,8009,0009,2009,4009,600

Pfizer and Ternium SA Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.85-3.63-2.41-1.2-0.02031.262.553.845.12 0.050.100.15
JavaScript chart by amCharts 3.21.15PFE TXR
       Returns  

Pair Trading with Pfizer and Ternium SA

The main advantage of trading using opposite Pfizer and Ternium SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pfizer position performs unexpectedly, Ternium SA 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 Ternium SA will offset losses from the drop in Ternium SA's long position.
The idea behind Pfizer Inc and Ternium SA DRC 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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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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