Correlation Between AbbVie and Pfizer
Can any of the company-specific risk be diversified away by investing in both AbbVie 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 AbbVie and Pfizer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AbbVie Inc and Pfizer Inc, you can compare the effects of market volatilities on AbbVie 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 AbbVie with a short position of Pfizer. Check out your portfolio center. Please also check ongoing floating volatility patterns of AbbVie and Pfizer.
Diversification Opportunities for AbbVie and Pfizer
Weak diversification
The 3 months correlation between AbbVie and Pfizer is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding AbbVie Inc and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc and AbbVie 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 AbbVie Inc 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 AbbVie i.e., AbbVie and Pfizer go up and down completely randomly.
Pair Corralation between AbbVie and Pfizer
Given the investment horizon of 90 days AbbVie Inc is expected to generate 1.73 times more return on investment than Pfizer. However, AbbVie is 1.73 times more volatile than Pfizer Inc. It trades about -0.18 of its potential returns per unit of risk. Pfizer Inc is currently generating about -0.5 per unit of risk. If you would invest 17,464 in AbbVie Inc on January 20, 2024 and sell it today you would lose (998.00) from holding AbbVie Inc or give up 5.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
AbbVie Inc vs. Pfizer Inc
Performance |
| Timeline |
| AbbVie Inc |
| Pfizer Inc |
AbbVie and Pfizer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AbbVie and Pfizer
The main advantage of trading using opposite AbbVie and Pfizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AbbVie 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.| AbbVie vs. Merck Company | AbbVie vs. Pfizer Inc | AbbVie vs. Eli Lilly and | AbbVie vs. Bristol Myers Squibb |
| Pfizer vs. Alkermes Plc | Pfizer vs. Ironwood Pharmaceuticals | Pfizer vs. Deciphera Pharmaceuticals LLC | Pfizer vs. Eagle Pharmaceuticals |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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