Correlation Between Financial Select and Pfizer
Can any of the company-specific risk be diversified away by investing in both Financial Select 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 Financial Select and Pfizer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial Select Sector and Pfizer Inc, you can compare the effects of market volatilities on Financial Select 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 Financial Select with a short position of Pfizer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Select and Pfizer.
Diversification Opportunities for Financial Select and Pfizer
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Financial and Pfizer is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Financial Select Sector and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc and Financial Select 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 Financial Select Sector 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 Financial Select i.e., Financial Select and Pfizer go up and down completely randomly.
Pair Corralation between Financial Select and Pfizer
Considering the 90-day investment horizon Financial Select Sector is expected to generate 0.55 times more return on investment than Pfizer. However, Financial Select Sector is 1.82 times less risky than Pfizer. It trades about 0.1 of its potential returns per unit of risk. Pfizer Inc is currently generating about -0.1 per unit of risk. If you would invest 3,256 in Financial Select Sector on January 17, 2024 and sell it today you would earn a total of 730.00 from holding Financial Select Sector or generate 22.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.19% |
| Values | Daily Returns |
Financial Select Sector vs. Pfizer Inc
Performance |
| Timeline |
| Financial Select Sector |
| Pfizer Inc |
Financial Select and Pfizer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial Select and Pfizer
The main advantage of trading using opposite Financial Select and Pfizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Select 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 Financial Select Sector 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. PetIQ Inc | Pfizer vs. Emergent Biosolutions | Pfizer vs. Neurocrine Biosciences | Pfizer vs. Haleon plc |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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