Correlation Between Pfizer and IShares Russell

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

By analyzing existing cross correlation between Pfizer Inc and iShares Russell 2000, you can compare the effects of market volatilities on Pfizer and IShares Russell 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 IShares Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pfizer and IShares Russell.

Diversification Opportunities for Pfizer and IShares Russell

-0.73

Correlation Coefficient

Pfizer  IShares Russell

Pay attention - limited upside

The 3 months correlation between Pfizer and IShares is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and iShares Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Russell 2000 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 IShares Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Russell 2000 has no effect on the direction of Pfizer i.e., Pfizer and IShares Russell go up and down completely randomly.

Pair Corralation between Pfizer and IShares Russell

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the IShares Russell. In addition to that, Pfizer is 1.14 times more volatile than iShares Russell 2000. It trades about -0.06 of its total potential returns per unit of risk. iShares Russell 2000 is currently generating about 0.17 per unit of volatility. If you would invest  21,262  in iShares Russell 2000 on September 2, 2024 and sell it today you would earn a total of  2,925  from holding iShares Russell 2000 or generate 13.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Pfizer Inc  vs.  iShares Russell 2000

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.

iShares Russell 2000

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell 2000 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, IShares Russell displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pfizer and IShares Russell

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

The idea behind Pfizer Inc and iShares Russell 2000 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.