Correlation Between Pfizer and Red Moon

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

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

Diversification Opportunities for Pfizer and Red Moon

-0.32

Correlation Coefficient

Pfizer  Red Moon

Very good diversification

The 3 months correlation between Pfizer and Red is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Red Moon Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Moon Resources 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 Red Moon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Moon Resources has no effect on the direction of Pfizer i.e., Pfizer and Red Moon go up and down completely randomly.

Pair Corralation between Pfizer and Red Moon

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the Red Moon. But the stock apears to be less risky and, when comparing its historical volatility, Pfizer Inc is 4.44 times less risky than Red Moon. The stock trades about -0.08 of its potential returns per unit of risk. The Red Moon Resources is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  189.00  in Red Moon Resources on January 25, 2024 and sell it today you would lose (129.00) from holding Red Moon Resources or give up 68.25% of portfolio value over 90 days.

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

Pfizer Inc  vs.  Red Moon Resources

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.

Red Moon Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Red Moon Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Red Moon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pfizer and Red Moon

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

The idea behind Pfizer Inc and Red Moon Resources 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.