Correlation Between Pfizer and Regeneron Pharmaceuticals

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

Diversification Opportunities for Pfizer and Regeneron Pharmaceuticals

0.5
  Correlation Coefficient

Very weak diversification

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

Pair Corralation between Pfizer and Regeneron Pharmaceuticals

Considering the 90-day investment horizon Pfizer is expected to generate 4.91 times less return on investment than Regeneron Pharmaceuticals. But when comparing it to its historical volatility, Pfizer Inc is 1.06 times less risky than Regeneron Pharmaceuticals. It trades about 0.0 of its potential returns per unit of risk. Regeneron Pharmaceuticals is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  62,353  in Regeneron Pharmaceuticals on May 13, 2022 and sell it today you would earn a total of  1,207  from holding Regeneron Pharmaceuticals or generate 1.94% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Pfizer Inc  vs.  Regeneron Pharmaceuticals

 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 rather sound technical and fundamental indicators, Pfizer is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pfizer Price Channel

Regeneron Pharmaceuticals 
Regeneron Performance
0 of 100
Over the last 90 days Regeneron Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Regeneron Pharmaceuticals is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Regeneron Price Channel

Pfizer and Regeneron Pharmaceuticals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Pfizer and Regeneron Pharmaceuticals

The main advantage of trading using opposite Pfizer and Regeneron Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pfizer position performs unexpectedly, Regeneron Pharmaceuticals 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 Regeneron Pharmaceuticals will offset losses from the drop in Regeneron Pharmaceuticals' long position.
The idea behind Pfizer Inc and Regeneron Pharmaceuticals 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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