Correlation Between Pfizer and Northern Lights

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

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

Diversification Opportunities for Pfizer and Northern Lights

-0.55

Correlation Coefficient

Pfizer  Northern Lights

Excellent diversification

The 3 months correlation between Pfizer and Northern is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights 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 Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of Pfizer i.e., Pfizer and Northern Lights go up and down completely randomly.

Pair Corralation between Pfizer and Northern Lights

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the Northern Lights. In addition to that, Pfizer is 1.39 times more volatile than Northern Lights. It trades about -0.04 of its total potential returns per unit of risk. Northern Lights is currently generating about 0.11 per unit of volatility. If you would invest  3,710  in Northern Lights on September 1, 2024 and sell it today you would earn a total of  526.00  from holding Northern Lights or generate 14.18% 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.  Northern Lights

Pfizer Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pfizer Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Pfizer is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Northern Lights

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Lights are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent fundamental drivers, Northern Lights may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Pfizer and Northern Lights

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

The idea behind Pfizer Inc and Northern Lights 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 Global Correlations module to find global opportunities by holding instruments from different markets.