Correlation Between Dividend Appreciation and Pfizer

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

Diversification Opportunities for Dividend Appreciation and Pfizer

0.33
  Correlation Coefficient

Weak diversification

The 3 months correlation between Dividend and Pfizer is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Dividend Appreciation ETF and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc and Dividend Appreciation 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 Dividend Appreciation ETF 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 Dividend Appreciation i.e., Dividend Appreciation and Pfizer go up and down completely randomly.

Pair Corralation between Dividend Appreciation and Pfizer

Considering the 90-day investment horizon Dividend Appreciation is expected to generate 8.87 times less return on investment than Pfizer. But when comparing it to its historical volatility, Dividend Appreciation ETF is 1.76 times less risky than Pfizer. It trades about 0.01 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  3,251  in Pfizer Inc on July 4, 2022 and sell it today you would earn a total of  1,125  from holding Pfizer Inc or generate 34.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Dividend Appreciation ETF  vs.  Pfizer Inc

 Performance (%) 
       Timeline  
Dividend Appreciation ETF 
Dividend Performance
0 of 100
Over the last 90 days Dividend Appreciation ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Dividend Appreciation is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Dividend 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

Dividend Appreciation and Pfizer Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dividend Appreciation and Pfizer

The main advantage of trading using opposite Dividend Appreciation and Pfizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dividend Appreciation 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.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Dividend Appreciation as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Dividend Appreciation's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Dividend Appreciation's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Dividend Appreciation ETF.
The idea behind Dividend Appreciation ETF 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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