Correlation Between Aston Martin and Pfizer

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

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

Diversification Opportunities for Aston Martin and Pfizer

0.52

Correlation Coefficient

Aston Martin  Pfizer

Very weak diversification

The 3 months correlation between Aston and Pfizer is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Aston Martin Lagonda and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc and Aston Martin 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 Aston Martin Lagonda 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 Aston Martin i.e., Aston Martin and Pfizer go up and down completely randomly.

Pair Corralation between Aston Martin and Pfizer

Assuming the 90 days horizon Aston Martin Lagonda is expected to under-perform the Pfizer. In addition to that, Aston Martin is 3.05 times more volatile than Pfizer Inc. It trades about -0.24 of its total potential returns per unit of risk. Pfizer Inc is currently generating about -0.46 per unit of volatility. If you would invest  2,763  in Pfizer Inc on January 19, 2024 and sell it today you would lose (221.00) from holding Pfizer Inc or give up 8.0% of portfolio value over 90 days.

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

Aston Martin Lagonda  vs.  Pfizer Inc

Aston Martin Lagonda

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aston Martin Lagonda has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pfizer Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pfizer Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Aston Martin and Pfizer

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

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.