Correlation Between China Solar and Pfizer

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

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

Diversification Opportunities for China Solar and Pfizer

0.17

Correlation Coefficient

China Solar  Pfizer

Average diversification

The 3 months correlation between China and Pfizer is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding China Solar Cln and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc and China Solar 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 China Solar Cln 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 China Solar i.e., China Solar and Pfizer go up and down completely randomly.

Pair Corralation between China Solar and Pfizer

Given the investment horizon of 90 days China Solar Cln is expected to generate 21.35 times more return on investment than Pfizer. However, China Solar is 21.35 times more volatile than Pfizer Inc. It trades about 0.11 of its potential returns per unit of risk. Pfizer Inc is currently generating about -0.14 per unit of risk. If you would invest  4.00  in China Solar Cln on January 20, 2024 and sell it today you would lose (0.90) from holding China Solar Cln or give up 22.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.67%
Values	Daily Returns

China Solar Cln  vs.  Pfizer Inc

China Solar Cln

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Solar Cln are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, China Solar disclosed solid returns over the last few months and may actually be approaching a breakup point.

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 uncertain 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 China Solar and Pfizer

The main advantage of trading using opposite China Solar and Pfizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Solar 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 China Solar Cln 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.