Correlation Between Pfizer and Bank of America
Can any of the company-specific risk be diversified away by investing in both Pfizer and Bank of America 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 Bank of America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pfizer Inc CDR and Bank of America, you can compare the effects of market volatilities on Pfizer and Bank of America 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 Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pfizer and Bank of America.
Diversification Opportunities for Pfizer and Bank of America
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Pfizer and Bank is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc CDR and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America 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 CDR are associated (or correlated) with Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of Pfizer i.e., Pfizer and Bank of America go up and down completely randomly.
Pair Corralation between Pfizer and Bank of America
Assuming the 90 days trading horizon Pfizer Inc CDR is expected to under-perform the Bank of America. But the stock apears to be less risky and, when comparing its historical volatility, Pfizer Inc CDR is 1.02 times less risky than Bank of America. The stock trades about -0.04 of its potential returns per unit of risk. The Bank of America is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,207 in Bank of America on November 27, 2024 and sell it today you would earn a total of 71.00 from holding Bank of America or generate 3.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pfizer Inc CDR vs. Bank of America
Performance |
| Timeline |
| Pfizer Inc CDR |
| Bank of America |
Pfizer and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pfizer and Bank of America
The main advantage of trading using opposite Pfizer and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pfizer position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.| Pfizer vs. Tree Island Steel | Pfizer vs. Altair Resources | Pfizer vs. DIRTT Environmental Solutions | Pfizer vs. Canadian Utilities Limited |
| Bank of America vs. Canso Credit Trust | Bank of America vs. Sun Life Financial | Bank of America vs. Flow Beverage Corp | Bank of America vs. Canlan Ice Sports |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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