Correlation Between Technology Select and Pfizer

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

By analyzing existing cross correlation between Technology Select Sector and Pfizer Inc, you can compare the effects of market volatilities on Technology Select 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 Technology Select with a short position of Pfizer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Technology Select and Pfizer.

Diversification Opportunities for Technology Select and Pfizer

0.13

Correlation Coefficient

Technology Select  Pfizer

Average diversification

The 3 months correlation between Technology and Pfizer is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Technology Select Sector and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc and Technology Select 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 Technology Select Sector 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 Technology Select i.e., Technology Select and Pfizer go up and down completely randomly.

Pair Corralation between Technology Select and Pfizer

Considering the 90-day investment horizon Technology Select Sector is expected to generate 1.14 times more return on investment than Pfizer. However, Technology Select is 1.14 times more volatile than Pfizer Inc. It trades about -0.29 of its potential returns per unit of risk. Pfizer Inc is currently generating about -0.5 per unit of risk. If you would invest  20,969  in Technology Select Sector on January 20, 2024 and sell it today you would lose (1,311) from holding Technology Select Sector or give up 6.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	91.3%
Values	Daily Returns

Technology Select Sector  vs.  Pfizer Inc

Technology Select Sector

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Technology Select Sector has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Technology Select is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

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.

Pair Trading with Technology Select and Pfizer

The main advantage of trading using opposite Technology Select and Pfizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Technology Select 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 Technology Select Sector 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.