Correlation Between Pfizer and First American
Can any of the company-specific risk be diversified away by investing in both Pfizer and First American 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 First American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pfizer Inc and First American Funds, you can compare the effects of market volatilities on Pfizer and First American 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 First American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pfizer and First American.
Diversification Opportunities for Pfizer and First American
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Pfizer and First is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and First American Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First American Funds 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 First American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First American Funds has no effect on the direction of Pfizer i.e., Pfizer and First American go up and down completely randomly.
Pair Corralation between Pfizer and First American
Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the First American. In addition to that, Pfizer is 11.9 times more volatile than First American Funds. It trades about -0.01 of its total potential returns per unit of risk. First American Funds is currently generating about 0.12 per unit of volatility. If you would invest 98.00 in First American Funds on September 3, 2024 and sell it today you would earn a total of 2.00 from holding First American Funds or generate 2.04% 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 vs. First American Funds
Performance |
| Timeline |
| Pfizer Inc |
| First American Funds |
Pfizer and First American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pfizer and First American
The main advantage of trading using opposite Pfizer and First American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pfizer position performs unexpectedly, First American 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 First American will offset losses from the drop in First American's long position.| Pfizer vs. Merck Company | Pfizer vs. Johnson Johnson | Pfizer vs. Highway Holdings Limited | Pfizer vs. QCR Holdings |
| First American vs. Vanguard Total Stock | First American vs. Vanguard 500 Index | First American vs. Vanguard Total Stock | First American vs. Vanguard Total Stock |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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