Correlation Between Pfizer and General Mills
Can any of the company-specific risk be diversified away by investing in both Pfizer and General Mills 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 General Mills into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pfizer Inc and General Mills, you can compare the effects of market volatilities on Pfizer and General Mills 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 General Mills. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pfizer and General Mills.
Diversification Opportunities for Pfizer and General Mills
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Pfizer and General is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and General Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Mills 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 General Mills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Mills has no effect on the direction of Pfizer i.e., Pfizer and General Mills go up and down completely randomly.
Pair Corralation between Pfizer and General Mills
Assuming the 90 days horizon Pfizer is expected to generate 3.38 times less return on investment than General Mills. But when comparing it to its historical volatility, Pfizer Inc is 1.24 times less risky than General Mills. It trades about 0.08 of its potential returns per unit of risk. General Mills is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 8,619 in General Mills on November 27, 2024 and sell it today you would earn a total of 2,033 from holding General Mills or generate 23.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pfizer Inc vs. General Mills
Performance |
| Timeline |
| Pfizer Inc |
| General Mills |
Pfizer and General Mills Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pfizer and General Mills
The main advantage of trading using opposite Pfizer and General Mills positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pfizer position performs unexpectedly, General Mills 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 General Mills will offset losses from the drop in General Mills' long position.The idea behind Pfizer Inc and General Mills 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.| General Mills vs. ANGI Homeservices | General Mills vs. INVITATION HOMES DL | General Mills vs. Scientific Games | General Mills vs. 24SEVENOFFICE GROUP AB |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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