Correlation Between Verizon Communications and Pfizer
Can any of the company-specific risk be diversified away by investing in both Verizon Communications and Pfizer 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 Verizon Communications and Pfizer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Pfizer Inc, you can compare the effects of market volatilities on Verizon Communications and Pfizer 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 Verizon Communications with a short position of Pfizer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and Pfizer.
Diversification Opportunities for Verizon Communications and Pfizer
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Verizon and Pfizer is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc and Verizon Communications 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 Verizon Communications are associated (or correlated) with Pfizer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pfizer Inc has no effect on the direction of Verizon Communications i.e., Verizon Communications and Pfizer go up and down completely randomly.
Pair Corralation between Verizon Communications and Pfizer
Allowing for the 90-day total investment horizon Verizon Communications is expected to generate 0.97 times more return on investment than Pfizer. However, Verizon Communications is 1.03 times less risky than Pfizer. It trades about 0.05 of its potential returns per unit of risk. Pfizer Inc is currently generating about -0.06 per unit of risk. If you would invest 3,234 in Verizon Communications on January 13, 2025 and sell it today you would earn a total of 1,139 from holding Verizon Communications or generate 35.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. Pfizer Inc
Performance |
| Timeline |
| Verizon Communications |
| Pfizer Inc |
Verizon Communications and Pfizer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and Pfizer
The main advantage of trading using opposite Verizon Communications and Pfizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, Pfizer 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 Pfizer will offset losses from the drop in Pfizer's long position.| Verizon Communications vs. T Mobile | Verizon Communications vs. Lumen Technologies | Verizon Communications vs. Comcast Corp | Verizon Communications vs. ATT Inc |
| Pfizer vs. AbbVie Inc | Pfizer vs. Merck Company | Pfizer vs. Eli Lilly and | Pfizer vs. Bristol Myers Squibb |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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