Correlation Between SP 500 and Pfizer

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Can any of the company-specific risk be diversified away by investing in both SP 500 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 SP 500 and Pfizer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SP 500 Low and Pfizer Inc, you can compare the effects of market volatilities on SP 500 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 SP 500 with a short position of Pfizer. Check out your portfolio center. Please also check ongoing floating volatility patterns of SP 500 and Pfizer.

Diversification Opportunities for SP 500 and Pfizer

0.3
  Correlation Coefficient

Weak diversification

The 3 months correlation between SP 500 and Pfizer is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding SP 500 Low and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc and SP 500 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 SP 500 Low 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 SP 500 i.e., SP 500 and Pfizer go up and down completely randomly.

Pair Corralation between SP 500 and Pfizer

Given the investment horizon of 90 days SP 500 is expected to generate 3.09 times less return on investment than Pfizer. But when comparing it to its historical volatility, SP 500 Low is 2.02 times less risky than Pfizer. It trades about 0.02 of its potential returns per unit of risk. Pfizer Inc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,350  in Pfizer Inc on July 8, 2022 and sell it today you would earn a total of  959.00  from holding Pfizer Inc or generate 28.63% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

SP 500 Low  vs.  Pfizer Inc

 Performance (%) 
       Timeline  
SP 500 Low 
SP 500 Performance
0 of 100
Over the last 90 days SP 500 Low has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, SP 500 is not utilizing all of its potentials. The new stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

SP 500 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

SP 500 and Pfizer Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SP 500 and Pfizer

The main advantage of trading using opposite SP 500 and Pfizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SP 500 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.
SP 500 vs. JP Morgan Chase
The idea behind SP 500 Low 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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