Correlation Between Pfizer and Sigma Lithium

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

Diversification Opportunities for Pfizer and Sigma Lithium

0.19
  Correlation Coefficient

Average diversification

The 3 months correlation between Pfizer and Sigma is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Sigma Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sigma Lithium 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 Sigma Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sigma Lithium Corp has no effect on the direction of Pfizer i.e., Pfizer and Sigma Lithium go up and down completely randomly.

Pair Corralation between Pfizer and Sigma Lithium

Considering the 90-day investment horizon Pfizer is expected to generate 1.48 times less return on investment than Sigma Lithium. But when comparing it to its historical volatility, Pfizer Inc is 2.36 times less risky than Sigma Lithium. It trades about 0.17 of its potential returns per unit of risk. Sigma Lithium Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,645  in Sigma Lithium Corp on August 29, 2022 and sell it today you would earn a total of  402.00  from holding Sigma Lithium Corp or generate 15.2% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Pfizer Inc  vs.  Sigma Lithium Corp

 Performance (%) 
       Timeline  
Pfizer Inc 
Pfizer Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Pfizer Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Pfizer may actually be approaching a critical reversion point that can send shares even higher in December 2022.

Pfizer Price Channel

Sigma Lithium Corp 
Sigma Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Sigma Lithium Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile primary indicators, Sigma Lithium revealed solid returns over the last few months and may actually be approaching a breakup point.

Sigma Price Channel

Pfizer and Sigma Lithium Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Pfizer and Sigma Lithium

The main advantage of trading using opposite Pfizer and Sigma Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pfizer position performs unexpectedly, Sigma Lithium 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 Sigma Lithium will offset losses from the drop in Sigma Lithium's long position.
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The idea behind Pfizer Inc and Sigma Lithium 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.
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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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