Correlation Between Pfizer and Merck

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

Diversification Opportunities for Pfizer and Merck

0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Pfizer and Merck is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company 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 Merck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck Company has no effect on the direction of Pfizer i.e., Pfizer and Merck go up and down completely randomly.

Pair Corralation between Pfizer and Merck

Considering the 90-day investment horizon Pfizer Inc is expected to generate 1.28 times more return on investment than Merck. However, Pfizer is 1.28 times more volatile than Merck Company. It trades about 0.04 of its potential returns per unit of risk. Merck Company is currently generating about 0.03 per unit of risk. If you would invest  3,244  in Pfizer Inc on June 27, 2022 and sell it today you would earn a total of  1,164  from holding Pfizer Inc or generate 35.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Pfizer Inc  vs.  Merck Company

 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 sluggish performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in October 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pfizer Price Channel

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 latest sluggish performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Merck Price Channel

Pfizer and Merck Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Pfizer and Merck

The main advantage of trading using opposite Pfizer and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pfizer position performs unexpectedly, Merck 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 Merck will offset losses from the drop in Merck's long position.
Pfizer vs. Sigma Lithium Corp
The idea behind Pfizer Inc and Merck Company 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.
Merck vs. Sigma Lithium Corp
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

Other Complementary Tools

Piotroski F Score
Get Piotroski F Score based on binary analysis strategy of nine different fundamentals
Go
Sync Your Broker
Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors.
Go
Theme Ratings
Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance
Go
Risk-Return Analysis
View associations between returns expected from investment and the risk you assume
Go
Idea Breakdown
Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes
Go
Portfolio Manager
State of the art Portfolio Manager to monitor and improve performance of your invested capital
Go
Focused Opportunities
Build portfolios using our predefined set of ideas and optimize them against your investing preferences
Go
Portfolio Suggestion
Get suggestions outside of your existing asset allocation including your own model portfolios
Go
Portfolio Center
All portfolio management and optimization tools to improve performance of your portfolios
Go