Correlation Between Pfizer and Biogen
Can any of the company-specific risk be diversified away by investing in both Pfizer and Biogen 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 Biogen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pfizer Inc and Biogen Inc, you can compare the effects of market volatilities on Pfizer and Biogen 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 Biogen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pfizer and Biogen.
Diversification Opportunities for Pfizer and Biogen
Significant diversification
The 3 months correlation between Pfizer and Biogen is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Biogen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biogen Inc 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 Biogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biogen Inc has no effect on the direction of Pfizer i.e., Pfizer and Biogen go up and down completely randomly.
Pair Corralation between Pfizer and Biogen
Considering the 90-day investment horizon Pfizer Inc is expected to generate 0.91 times more return on investment than Biogen. However, Pfizer Inc is 1.1 times less risky than Biogen. It trades about 0.0 of its potential returns per unit of risk. Biogen Inc is currently generating about -0.12 per unit of risk. If you would invest 2,625 in Pfizer Inc on November 9, 2024 and sell it today you would lose (42.00) from holding Pfizer Inc or give up 1.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pfizer Inc vs. Biogen Inc
Performance |
| Timeline |
| Pfizer Inc |
| Biogen Inc |
Pfizer and Biogen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pfizer and Biogen
The main advantage of trading using opposite Pfizer and Biogen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pfizer position performs unexpectedly, Biogen 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 Biogen will offset losses from the drop in Biogen's long position.| Pfizer vs. AbbVie Inc | Pfizer vs. Merck Company | Pfizer vs. Eli Lilly and | Pfizer vs. Bristol Myers Squibb |
| Biogen vs. Bristol Myers Squibb | Biogen vs. AbbVie Inc | Biogen vs. Merck Company | Biogen vs. Gilead Sciences |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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