Correlation Between Pfizer and 3M

Can any of the company-specific risk be diversified away by investing in both Pfizer and 3M 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 3M into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pfizer Inc and 3M Company, you can compare the effects of market volatilities on Pfizer and 3M 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 3M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pfizer and 3M.

Diversification Opportunities for Pfizer and 3M

-0.17

Correlation Coefficient

Pfizer  3M

Good diversification

The 3 months correlation between Pfizer and 3M is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and 3M Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3M Company 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 3M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3M Company has no effect on the direction of Pfizer i.e., Pfizer and 3M go up and down completely randomly.

Pair Corralation between Pfizer and 3M

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the 3M. But the stock apears to be less risky and, when comparing its historical volatility, Pfizer Inc is 2.22 times less risky than 3M. The stock trades about -0.5 of its potential returns per unit of risk. The 3M Company is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  9,039  in 3M Company on January 20, 2024 and sell it today you would earn a total of  109.00  from holding 3M Company or generate 1.21% return on investment over 90 days.

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

Pfizer Inc  vs.  3M Company

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.

3M Company

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in 3M Company are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, 3M is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Pfizer and 3M

The main advantage of trading using opposite Pfizer and 3M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pfizer position performs unexpectedly, 3M 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 3M will offset losses from the drop in 3M's long position.

The idea behind Pfizer Inc and 3M Company 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.