Correlation Between AstraZeneca PLC and Pfizer
Can any of the company-specific risk be diversified away by investing in both AstraZeneca PLC 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 AstraZeneca PLC and Pfizer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AstraZeneca PLC and Pfizer Inc, you can compare the effects of market volatilities on AstraZeneca PLC 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 AstraZeneca PLC with a short position of Pfizer. Check out your portfolio center. Please also check ongoing floating volatility patterns of AstraZeneca PLC and Pfizer.
Diversification Opportunities for AstraZeneca PLC and Pfizer
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AstraZeneca and Pfizer is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding AstraZeneca PLC and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc and AstraZeneca PLC 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 AstraZeneca PLC 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 AstraZeneca PLC i.e., AstraZeneca PLC and Pfizer go up and down completely randomly.
Pair Corralation between AstraZeneca PLC and Pfizer
Assuming the 90 days trading horizon AstraZeneca PLC is expected to under-perform the Pfizer. In addition to that, AstraZeneca PLC is 1.35 times more volatile than Pfizer Inc. It trades about -0.05 of its total potential returns per unit of risk. Pfizer Inc is currently generating about -0.06 per unit of volatility. If you would invest 2,523 in Pfizer Inc on September 4, 2024 and sell it today you would lose (60.00) from holding Pfizer Inc or give up 2.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AstraZeneca PLC vs. Pfizer Inc
Performance |
| Timeline |
| AstraZeneca PLC |
| Pfizer Inc |
AstraZeneca PLC and Pfizer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AstraZeneca PLC and Pfizer
The main advantage of trading using opposite AstraZeneca PLC and Pfizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AstraZeneca PLC 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.The idea behind AstraZeneca PLC and Pfizer Inc 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.| Pfizer vs. AUSNUTRIA DAIRY | Pfizer vs. JJ SNACK FOODS | Pfizer vs. Premier Foods PLC | Pfizer vs. Lery Seafood Group |
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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