Correlation Between Pfizer and Ford

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

Diversification Opportunities for Pfizer and Ford

-0.06
  Correlation Coefficient

Good diversification

The 3 months correlation between Pfizer and Ford is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor 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 Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of Pfizer i.e., Pfizer and Ford go up and down completely randomly.

Pair Corralation between Pfizer and Ford

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the Ford. But the stock apears to be less risky and, when comparing its historical volatility, Pfizer Inc is 2.79 times less risky than Ford. The stock trades about -0.31 of its potential returns per unit of risk. The Ford Motor is currently generating about 0.59 of returns per unit of risk over similar time horizon. If you would invest  1,129  in Ford Motor on May 10, 2022 and sell it today you would earn a total of  445.00  from holding Ford Motor or generate 39.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Pfizer Inc  vs.  Ford Motor

 Performance (%) 
       Timeline  
Pfizer Inc 
Pfizer Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Pfizer Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Pfizer is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pfizer Price Channel

Ford Motor 
Ford Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Ford exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ford Price Channel

Pfizer and Ford Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Pfizer and Ford

The main advantage of trading using opposite Pfizer and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pfizer position performs unexpectedly, Ford 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 Ford will offset losses from the drop in Ford's long position.
The idea behind Pfizer Inc and Ford Motor 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.
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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