Correlation Between Pfizer and General Electric

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Can any of the company-specific risk be diversified away by investing in both Pfizer and General Electric 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 General Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pfizer Inc and General Electric, you can compare the effects of market volatilities on Pfizer and General Electric 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 General Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pfizer and General Electric.

Diversification Opportunities for Pfizer and General Electric

-0.56
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Pfizer and General is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and General Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Electric 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 General Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Electric has no effect on the direction of Pfizer i.e., Pfizer and General Electric go up and down completely randomly.

Pair Corralation between Pfizer and General Electric

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the General Electric. In addition to that, Pfizer is 1.35 times more volatile than General Electric. It trades about -0.09 of its total potential returns per unit of risk. General Electric is currently generating about 0.74 per unit of volatility. If you would invest  12,993  in General Electric on November 25, 2023 and sell it today you would earn a total of  2,174  from holding General Electric or generate 16.73% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Pfizer Inc  vs.  General Electric

 Performance 
       Timeline  
Pfizer Inc 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
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.
General Electric 

Risk-Adjusted Performance

27 of 100

 
Low
 
High
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in General Electric are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, General Electric exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pfizer and General Electric Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Pfizer and General Electric

The main advantage of trading using opposite Pfizer and General Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pfizer position performs unexpectedly, General Electric 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 General Electric will offset losses from the drop in General Electric's long position.
The idea behind Pfizer Inc and General Electric 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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