Correlation Between Pfizer and Barloworld

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

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

Diversification Opportunities for Pfizer and Barloworld

0.33

Correlation Coefficient

Pfizer  Barloworld

Weak diversification

The 3 months correlation between Pfizer and Barloworld is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Barloworld Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barloworld ADR and Pfizer 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 Pfizer Inc are associated (or correlated) with Barloworld. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barloworld ADR has no effect on the direction of Pfizer i.e., Pfizer and Barloworld go up and down completely randomly.

Pair Corralation between Pfizer and Barloworld

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the Barloworld. But the stock apears to be less risky and, when comparing its historical volatility, Pfizer Inc is 3.17 times less risky than Barloworld. The stock trades about -0.09 of its potential returns per unit of risk. The Barloworld Ltd ADR is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  562.00  in Barloworld Ltd ADR on January 24, 2024 and sell it today you would lose (208.00) from holding Barloworld Ltd ADR or give up 37.01% of portfolio value over 90 days.

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

Pfizer Inc  vs.  Barloworld Ltd ADR

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.

Barloworld ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barloworld Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic 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.

Pair Trading with Pfizer and Barloworld

The main advantage of trading using opposite Pfizer and Barloworld positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pfizer position performs unexpectedly, Barloworld 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 Barloworld will offset losses from the drop in Barloworld's long position.

The idea behind Pfizer Inc and Barloworld Ltd ADR 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.