Correlation Between Pfizer and Procter Gamble

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

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

Diversification Opportunities for Pfizer and Procter Gamble

0.14

Correlation Coefficient

Pfizer  Procter Gamble

Average diversification

The 3 months correlation between Pfizer and Procter is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble 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 Procter Gamble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procter Gamble has no effect on the direction of Pfizer i.e., Pfizer and Procter Gamble go up and down completely randomly.

Pair Corralation between Pfizer and Procter Gamble

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the Procter Gamble. In addition to that, Pfizer is 2.04 times more volatile than Procter Gamble. It trades about -0.05 of its total potential returns per unit of risk. Procter Gamble is currently generating about 0.12 per unit of volatility. If you would invest  15,514  in Procter Gamble on January 26, 2024 and sell it today you would earn a total of  746.00  from holding Procter Gamble or generate 4.81% return on investment over 90 days.

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

Pfizer Inc  vs.  Procter Gamble

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.

Procter Gamble

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Procter Gamble are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Procter Gamble is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Pfizer and Procter Gamble

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

The idea behind Pfizer Inc and Procter Gamble 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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.