Correlation Between Merck and Pfizer

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Merck 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 Merck and Pfizer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Pfizer Inc, you can compare the effects of market volatilities on Merck 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 Merck with a short position of Pfizer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Pfizer.

Diversification Opportunities for Merck and Pfizer

0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Merck and Pfizer is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc and Merck 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 Merck Company 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 Merck i.e., Merck and Pfizer go up and down completely randomly.

Pair Corralation between Merck and Pfizer

Considering the 90-day investment horizon Merck Company is expected to generate 0.99 times more return on investment than Pfizer. However, Merck Company is 1.01 times less risky than Pfizer. It trades about 0.02 of its potential returns per unit of risk. Pfizer Inc is currently generating about -0.17 per unit of risk. If you would invest  8,573  in Merck Company on July 5, 2022 and sell it today you would earn a total of  39.00  from holding Merck Company or generate 0.45% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Merck Company  vs.  Pfizer Inc

 Performance (%) 
       Timeline  
Merck Company 
Merck Performance
0 of 100
Over the last 90 days Merck Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Merck is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Merck Price Channel

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

Merck and Pfizer Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Merck and Pfizer

The main advantage of trading using opposite Merck and Pfizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck 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.
Merck vs. Amazon Inc
The idea behind Merck Company 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.
Pfizer 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

Other Complementary Tools

Headlines Timeline
Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity
Go
Equity Analysis
Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities
Go
Portfolio Optimization
Compute new portfolio that will generate highest expected return given your specified tolerance for risk
Go
Companies Directory
Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals
Go
CEO Directory
Screen CEOs from public companies around the world
Go
Price Ceiling Movement
Calculate and plot Price Ceiling Movement for different equity instruments
Go
Headlines Timeline
Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity
Go