Correlation Between Goldman Sachs and Pfizer

Can any of the company-specific risk be diversified away by investing in both Goldman Sachs 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 Goldman Sachs and Pfizer into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Goldman Sachs ActiveBeta and Pfizer Inc, you can compare the effects of market volatilities on Goldman Sachs 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 Goldman Sachs with a short position of Pfizer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldman Sachs and Pfizer.

Diversification Opportunities for Goldman Sachs and Pfizer

0.09

Correlation Coefficient

Goldman Sachs  Pfizer

Significant diversification

The 3 months correlation between Goldman and Pfizer is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs ActiveBeta and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc and Goldman Sachs 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 Goldman Sachs ActiveBeta 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 Goldman Sachs i.e., Goldman Sachs and Pfizer go up and down completely randomly.

Pair Corralation between Goldman Sachs and Pfizer

Considering the 90-day investment horizon Goldman Sachs is expected to generate 1.65 times less return on investment than Pfizer. But when comparing it to its historical volatility, Goldman Sachs ActiveBeta is 1.92 times less risky than Pfizer. It trades about 0.07 of its potential returns per unit of risk. Pfizer Inc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,722  in Pfizer Inc on February 3, 2024 and sell it today you would earn a total of  57.00  from holding Pfizer Inc or generate 2.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Goldman Sachs ActiveBeta  vs.  Pfizer Inc

Goldman Sachs ActiveBeta

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs ActiveBeta are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Goldman Sachs may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pfizer Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pfizer Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Pfizer is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Goldman Sachs and Pfizer

The main advantage of trading using opposite Goldman Sachs and Pfizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goldman Sachs 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 Goldman Sachs ActiveBeta 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.

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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.