Correlation Between Pfizer and Merrill Lynch
Can any of the company-specific risk be diversified away by investing in both Pfizer and Merrill Lynch 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 Merrill Lynch into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pfizer Inc and Merrill Lynch, you can compare the effects of market volatilities on Pfizer and Merrill Lynch 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 Merrill Lynch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pfizer and Merrill Lynch.
Diversification Opportunities for Pfizer and Merrill Lynch
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Pfizer and Merrill is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Merrill Lynch in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merrill Lynch 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 Merrill Lynch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merrill Lynch has no effect on the direction of Pfizer i.e., Pfizer and Merrill Lynch go up and down completely randomly.
Pair Corralation between Pfizer and Merrill Lynch
Considering the 90-day investment horizon Pfizer Inc is expected to generate 0.1 times more return on investment than Merrill Lynch. However, Pfizer Inc is 9.94 times less risky than Merrill Lynch. It trades about -0.07 of its potential returns per unit of risk. Merrill Lynch is currently generating about -0.14 per unit of risk. If you would invest 4,702 in Pfizer Inc on September 2, 2024 and sell it today you would lose (2,081) from holding Pfizer Inc or give up 44.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 9.68% |
| Values | Daily Returns |
Pfizer Inc vs. Merrill Lynch
Performance |
| Timeline |
| Pfizer Inc |
| Merrill Lynch |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Pfizer and Merrill Lynch Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pfizer and Merrill Lynch
The main advantage of trading using opposite Pfizer and Merrill Lynch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pfizer position performs unexpectedly, Merrill Lynch 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 Merrill Lynch will offset losses from the drop in Merrill Lynch's long position.| Pfizer vs. Crinetics Pharmaceuticals | Pfizer vs. Enanta Pharmaceuticals | Pfizer vs. Amicus Therapeutics | Pfizer vs. Connect Biopharma Holdings |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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