Correlation Between Pfizer and 2Seventy Bio

Can any of the company-specific risk be diversified away by investing in both Pfizer and 2Seventy Bio 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 2Seventy Bio into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pfizer Inc and 2Seventy Bio, you can compare the effects of market volatilities on Pfizer and 2Seventy Bio 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 2Seventy Bio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pfizer and 2Seventy Bio.

Diversification Opportunities for Pfizer and 2Seventy Bio

0.06

Correlation Coefficient

Pfizer  2Seventy Bio

Significant diversification

The 3 months correlation between Pfizer and 2Seventy is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and 2Seventy Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 2Seventy Bio 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 2Seventy Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 2Seventy Bio has no effect on the direction of Pfizer i.e., Pfizer and 2Seventy Bio go up and down completely randomly.

Pair Corralation between Pfizer and 2Seventy Bio

Considering the 90-day investment horizon Pfizer Inc is expected to generate 0.36 times more return on investment than 2Seventy Bio. However, Pfizer Inc is 2.75 times less risky than 2Seventy Bio. It trades about -0.02 of its potential returns per unit of risk. 2Seventy Bio is currently generating about -0.04 per unit of risk. If you would invest  2,755  in Pfizer Inc on February 2, 2024 and sell it today you would lose (37.00) from holding Pfizer Inc or give up 1.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Pfizer Inc  vs.  2Seventy Bio

Pfizer Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pfizer Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Pfizer is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

2Seventy Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 2Seventy Bio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, 2Seventy Bio is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Pfizer and 2Seventy Bio

The main advantage of trading using opposite Pfizer and 2Seventy Bio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pfizer position performs unexpectedly, 2Seventy Bio 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 2Seventy Bio will offset losses from the drop in 2Seventy Bio's long position.

The idea behind Pfizer Inc and 2Seventy Bio 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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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.