Correlation Between Pfizer and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Pfizer and Northern Lights 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 Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pfizer Inc and Northern Lights, you can compare the effects of market volatilities on Pfizer and Northern Lights 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 Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pfizer and Northern Lights.
Diversification Opportunities for Pfizer and Northern Lights
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Pfizer and Northern is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights 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 Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of Pfizer i.e., Pfizer and Northern Lights go up and down completely randomly.
Pair Corralation between Pfizer and Northern Lights
Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the Northern Lights. In addition to that, Pfizer is 1.23 times more volatile than Northern Lights. It trades about -0.07 of its total potential returns per unit of risk. Northern Lights is currently generating about 0.19 per unit of volatility. If you would invest 3,009 in Northern Lights on November 9, 2024 and sell it today you would earn a total of 142.00 from holding Northern Lights or generate 4.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Pfizer Inc vs. Northern Lights
Performance |
| Timeline |
| Pfizer Inc |
| Northern Lights |
Pfizer and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pfizer and Northern Lights
The main advantage of trading using opposite Pfizer and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pfizer position performs unexpectedly, Northern Lights 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 Northern Lights will offset losses from the drop in Northern Lights' long position.| Pfizer vs. AbbVie Inc | Pfizer vs. Merck Company | Pfizer vs. Eli Lilly and | Pfizer vs. Bristol Myers Squibb |
| Northern Lights vs. Inspire Tactical Balanced | Northern Lights vs. Inspire SmallMid Cap | Northern Lights vs. Inspire Faithward Mid | Northern Lights vs. Northern Lights |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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