Correlation Between Pfizer and Methanex
Can any of the company-specific risk be diversified away by investing in both Pfizer and Methanex 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 Methanex 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 Methanex, you can compare the effects of market volatilities on Pfizer and Methanex 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 Methanex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pfizer and Methanex.
Diversification Opportunities for Pfizer and Methanex
Excellent diversification
The 3 months correlation between Pfizer and Methanex is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc CDR and Methanex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methanex 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 Methanex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Methanex has no effect on the direction of Pfizer i.e., Pfizer and Methanex go up and down completely randomly.
Pair Corralation between Pfizer and Methanex
Assuming the 90 days trading horizon Pfizer Inc CDR is expected to under-perform the Methanex. But the stock apears to be less risky and, when comparing its historical volatility, Pfizer Inc CDR is 1.45 times less risky than Methanex. The stock trades about -0.07 of its potential returns per unit of risk. The Methanex is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 5,017 in Methanex on August 27, 2024 and sell it today you would earn a total of 1,409 from holding Methanex or generate 28.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pfizer Inc CDR vs. Methanex
Performance |
| Timeline |
| Pfizer Inc CDR |
| Methanex |
Pfizer and Methanex Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pfizer and Methanex
The main advantage of trading using opposite Pfizer and Methanex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pfizer position performs unexpectedly, Methanex 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 Methanex will offset losses from the drop in Methanex's long position.| Pfizer vs. Auxly Cannabis Group | Pfizer vs. Entourage Health Corp | Pfizer vs. iShares Canadian HYBrid | Pfizer vs. Altagas Cum Red |
| Methanex vs. Finning International | Methanex vs. Keyera Corp | Methanex vs. Linamar | Methanex vs. Russel Metals |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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