Correlation Between Target and Pfizer

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

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

Diversification Opportunities for Target and Pfizer

-0.38

Correlation Coefficient

Target  Pfizer

Very good diversification

The 3 months correlation between Target and Pfizer is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Target and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc and Target 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 Target 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 Target i.e., Target and Pfizer go up and down completely randomly.

Pair Corralation between Target and Pfizer

Considering the 90-day investment horizon Target is expected to generate 2.1 times less return on investment than Pfizer. In addition to that, Target is 1.36 times more volatile than Pfizer Inc. It trades about 0.04 of its total potential returns per unit of risk. Pfizer Inc is currently generating about 0.12 per unit of volatility. If you would invest  2,551  in Pfizer Inc on March 3, 2024 and sell it today you would earn a total of  315.00  from holding Pfizer Inc or generate 12.35% return on investment over 90 days.

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

Target  vs.  Pfizer Inc

Target

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Target are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Target is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pfizer Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pfizer Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Pfizer may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Target and Pfizer

The main advantage of trading using opposite Target and Pfizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target 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 Target 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.