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
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.
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Pfizer Inc vs. General Electric
Pfizer and General Electric Volatility Contrast
Pair Trading with Pfizer and General ElectricThe 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.
Check out your portfolio center.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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