Correlation Between Exxon and Pfizer

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

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

Diversification Opportunities for Exxon and Pfizer

-0.43

Correlation Coefficient

Exxon  Pfizer

Very good diversification

The 3 months correlation between Exxon and Pfizer is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc and Exxon 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 Exxon Mobil Corp 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 Exxon i.e., Exxon and Pfizer go up and down completely randomly.

Pair Corralation between Exxon and Pfizer

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 0.75 times more return on investment than Pfizer. However, Exxon Mobil Corp is 1.34 times less risky than Pfizer. It trades about 0.34 of its potential returns per unit of risk. Pfizer Inc is currently generating about -0.08 per unit of risk. If you would invest  9,593  in Exxon Mobil Corp on January 20, 2024 and sell it today you would earn a total of  2,259  from holding Exxon Mobil Corp or generate 23.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Exxon Mobil Corp  vs.  Pfizer Inc

Exxon Mobil Corp

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Exxon displayed solid returns over the last few months and may actually be approaching a breakup point.

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 Exxon and Pfizer

The main advantage of trading using opposite Exxon and Pfizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon 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 Exxon Mobil Corp 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.