Correlation Between PFIZER and Travelers Companies

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Can any of the company-specific risk be diversified away by investing in both PFIZER and Travelers Companies 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 Travelers Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PFIZER INC and The Travelers Companies, you can compare the effects of market volatilities on PFIZER and Travelers Companies 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 Travelers Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of PFIZER and Travelers Companies.

Diversification Opportunities for PFIZER and Travelers Companies

-0.18
  Correlation Coefficient

Good diversification

The 3 months correlation between PFIZER and Travelers is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding PFIZER INC and The Travelers Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Travelers Companies 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 Travelers Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Travelers Companies has no effect on the direction of PFIZER i.e., PFIZER and Travelers Companies go up and down completely randomly.

Pair Corralation between PFIZER and Travelers Companies

Assuming the 90 days trading horizon PFIZER is expected to generate 237.4 times less return on investment than Travelers Companies. But when comparing it to its historical volatility, PFIZER INC is 3.76 times less risky than Travelers Companies. It trades about 0.0 of its potential returns per unit of risk. The Travelers Companies is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  16,854  in The Travelers Companies on September 12, 2024 and sell it today you would earn a total of  7,911  from holding The Travelers Companies or generate 46.94% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy96.31%
ValuesDaily Returns

PFIZER INC  vs.  The Travelers Companies

 Performance 
       Timeline  
PFIZER INC 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days PFIZER INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PFIZER is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
The Travelers Companies 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in The Travelers Companies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Travelers Companies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PFIZER and Travelers Companies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PFIZER and Travelers Companies

The main advantage of trading using opposite PFIZER and Travelers Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PFIZER position performs unexpectedly, Travelers Companies 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 Travelers Companies will offset losses from the drop in Travelers Companies' long position.
The idea behind PFIZER INC and The Travelers Companies pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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