Correlation Between Pfizer and AAR Corp

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

Diversification Opportunities for Pfizer and AAR Corp

0.5
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Pfizer and AAR Corp is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and AAR Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAR Corp 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 AAR Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAR Corp has no effect on the direction of Pfizer i.e., Pfizer and AAR Corp go up and down completely randomly.

Pair Corralation between Pfizer and AAR Corp

Considering the 90-day investment horizon Pfizer Inc is expected to generate 0.68 times more return on investment than AAR Corp. However, Pfizer Inc is 1.46 times less risky than AAR Corp. It trades about -0.2 of its potential returns per unit of risk. AAR Corp is currently generating about -0.24 per unit of risk. If you would invest  4,986  in Pfizer Inc on July 5, 2022 and sell it today you would lose (610.00)  from holding Pfizer Inc or give up 12.23% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Pfizer Inc  vs.  AAR Corp

 Performance (%) 
       Timeline  
Pfizer Inc 
Pfizer Performance
0 of 100
Over the last 90 days Pfizer Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in November 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pfizer Price Channel

AAR Corp 
AAR Corp Performance
0 of 100
Over the last 90 days AAR Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest conflicting performance, the Stock's forward indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

AAR Corp Price Channel

Pfizer and AAR Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Pfizer and AAR Corp

The main advantage of trading using opposite Pfizer and AAR Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pfizer position performs unexpectedly, AAR Corp 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 AAR Corp will offset losses from the drop in AAR Corp's long position.
Pfizer vs. Amazon Inc
The idea behind Pfizer Inc and AAR Corp 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.
AAR Corp vs. Amazon Inc
Check out your portfolio center. 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 Watchlist Optimization module to optimize watchlists to build efficient portfolio or rebalance existing positions based on mean-variance optimization algorithm.

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