Correlation Between Benchmark Electronics and Pfizer

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

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

Diversification Opportunities for Benchmark Electronics and Pfizer

0.07

Correlation Coefficient

Benchmark Electronics  Pfizer

Significant diversification

The 3 months correlation between Benchmark and Pfizer is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Benchmark Electronics and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc and Benchmark Electronics 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 Benchmark Electronics 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 Benchmark Electronics i.e., Benchmark Electronics and Pfizer go up and down completely randomly.

Pair Corralation between Benchmark Electronics and Pfizer

Considering the 90-day investment horizon Benchmark Electronics is expected to generate 2.27 times more return on investment than Pfizer. However, Benchmark Electronics is 2.27 times more volatile than Pfizer Inc. It trades about 0.28 of its potential returns per unit of risk. Pfizer Inc is currently generating about 0.15 per unit of risk. If you would invest  2,991  in Benchmark Electronics on February 7, 2024 and sell it today you would earn a total of  816.00  from holding Benchmark Electronics or generate 27.28% return on investment over 90 days.

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

Benchmark Electronics  vs.  Pfizer Inc

Benchmark Electronics

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Benchmark Electronics are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical indicators, Benchmark Electronics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pfizer Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pfizer Inc are ranked lower than 2 (%) 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Benchmark Electronics and Pfizer

The main advantage of trading using opposite Benchmark Electronics and Pfizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Benchmark Electronics 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 Benchmark Electronics 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.