Correlation Between Spectrum Pharmaceuticals and Pfizer

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

Diversification Opportunities for Spectrum Pharmaceuticals and Pfizer

0.52
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Spectrum and Pfizer is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Spectrum Pharmaceuticals and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc and Spectrum Pharmaceuticals 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 Spectrum Pharmaceuticals are associated (or correlated) with Pfizer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pfizer Inc has no effect on the direction of Spectrum Pharmaceuticals i.e., Spectrum Pharmaceuticals and Pfizer go up and down completely randomly.

Pair Corralation between Spectrum Pharmaceuticals and Pfizer

Given the investment horizon of 90 days Spectrum Pharmaceuticals is expected to generate 4.21 times more return on investment than Pfizer. However, Spectrum Pharmaceuticals is 4.21 times more volatile than Pfizer Inc. It trades about 0.03 of its potential returns per unit of risk. Pfizer Inc is currently generating about -0.07 per unit of risk. If you would invest  114.00  in Spectrum Pharmaceuticals on December 29, 2023 and sell it today you would lose (11.00) from holding Spectrum Pharmaceuticals or give up 9.65% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy66.8%
ValuesDaily Returns

Spectrum Pharmaceuticals  vs.  Pfizer Inc

 Performance 
       Timeline  
Spectrum Pharmaceuticals 

Risk-Adjusted Performance

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Over the last 90 days Spectrum Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Spectrum Pharmaceuticals is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.
Pfizer Inc 

Risk-Adjusted Performance

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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 rather sound technical and fundamental indicators, Pfizer is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Spectrum Pharmaceuticals and Pfizer Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Spectrum Pharmaceuticals and Pfizer

The main advantage of trading using opposite Spectrum Pharmaceuticals and Pfizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spectrum Pharmaceuticals position performs unexpectedly, Pfizer 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 Pfizer will offset losses from the drop in Pfizer's long position.
The idea behind Spectrum Pharmaceuticals and Pfizer Inc 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 Stocks Directory module to find actively traded stocks across global markets.

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