Correlation Between Laboratory and Pfizer

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

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

Diversification Opportunities for Laboratory and Pfizer

0.57

Correlation Coefficient

Laboratory  Pfizer

Very weak diversification

The 3 months correlation between Laboratory and Pfizer is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Laboratory of and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc and Laboratory 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 Laboratory of 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 Laboratory i.e., Laboratory and Pfizer go up and down completely randomly.

Pair Corralation between Laboratory and Pfizer

Allowing for the 90-day total investment horizon Laboratory of is expected to generate 0.73 times more return on investment than Pfizer. However, Laboratory of is 1.37 times less risky than Pfizer. It trades about 0.03 of its potential returns per unit of risk. Pfizer Inc is currently generating about -0.09 per unit of risk. If you would invest  19,467  in Laboratory of on January 26, 2024 and sell it today you would earn a total of  1,327  from holding Laboratory of or generate 6.82% return on investment over 90 days.

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

Laboratory of  vs.  Pfizer Inc

Laboratory

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Laboratory of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

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 rather sound technical and fundamental indicators, Pfizer is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Laboratory and Pfizer

The main advantage of trading using opposite Laboratory and Pfizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Laboratory 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 Laboratory of 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 CEOs Directory module to screen CEOs from public companies around the world.