Correlation Between Biomarin Pharmaceutical and Pfizer

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

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

Diversification Opportunities for Biomarin Pharmaceutical and Pfizer

-0.16

Correlation Coefficient

Biomarin Pharmaceutical  Pfizer

Good diversification

The 3 months correlation between Biomarin and Pfizer is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Biomarin Pharmaceutical and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc and Biomarin Pharmaceutical 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 Biomarin Pharmaceutical 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 Biomarin Pharmaceutical i.e., Biomarin Pharmaceutical and Pfizer go up and down completely randomly.

Pair Corralation between Biomarin Pharmaceutical and Pfizer

Given the investment horizon of 90 days Biomarin Pharmaceutical is expected to generate 0.91 times more return on investment than Pfizer. However, Biomarin Pharmaceutical is 1.1 times less risky than Pfizer. It trades about 0.18 of its potential returns per unit of risk. Pfizer Inc is currently generating about -0.2 per unit of risk. If you would invest  8,652  in Biomarin Pharmaceutical on January 23, 2024 and sell it today you would earn a total of  297.00  from holding Biomarin Pharmaceutical or generate 3.43% return on investment over 90 days.

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

Biomarin Pharmaceutical  vs.  Pfizer Inc

Biomarin Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biomarin Pharmaceutical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Biomarin Pharmaceutical is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the 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 Biomarin Pharmaceutical and Pfizer

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