Correlation Between Pfizer and Alcoa Corp
Can any of the company-specific risk be diversified away by investing in both Pfizer and Alcoa Corp 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 Alcoa Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pfizer Inc and Alcoa Corp, you can compare the effects of market volatilities on Pfizer and Alcoa Corp 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 Alcoa Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pfizer and Alcoa Corp.
Diversification Opportunities for Pfizer and Alcoa Corp
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Pfizer and Alcoa is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa 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 Alcoa Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcoa Corp has no effect on the direction of Pfizer i.e., Pfizer and Alcoa Corp go up and down completely randomly.
Pair Corralation between Pfizer and Alcoa Corp
Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the Alcoa Corp. But the stock apears to be less risky and, when comparing its historical volatility, Pfizer Inc is 2.87 times less risky than Alcoa Corp. The stock trades about -0.5 of its potential returns per unit of risk. The Alcoa Corp is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 3,135 in Alcoa Corp on January 20, 2024 and sell it today you would earn a total of 412.00 from holding Alcoa Corp or generate 13.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pfizer Inc vs. Alcoa Corp
Performance |
| Timeline |
| Pfizer Inc |
| Alcoa Corp |
Pfizer and Alcoa Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pfizer and Alcoa Corp
The main advantage of trading using opposite Pfizer and Alcoa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pfizer position performs unexpectedly, Alcoa Corp 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 Alcoa Corp will offset losses from the drop in Alcoa Corp's long position.| Pfizer vs. Alkermes Plc | Pfizer vs. Ironwood Pharmaceuticals | Pfizer vs. Deciphera Pharmaceuticals LLC | Pfizer vs. Eagle Pharmaceuticals |
| Alcoa Corp vs. Constellium Nv | Alcoa Corp vs. Century Aluminum | Alcoa Corp vs. China Hongqiao Group | Alcoa Corp vs. Kaiser Aluminum |
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 the Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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