Correlation Between Allergan Plc and Pfizer

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

Diversification Opportunities for Allergan Plc and Pfizer

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  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Allergan and Pfizer is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Allergan Plc and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc and Allergan Plc 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 Allergan Plc 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 Allergan Plc i.e., Allergan Plc and Pfizer go up and down completely randomly.

Pair Corralation between Allergan Plc and Pfizer

If you would invest  2,689  in Pfizer Inc on December 29, 2023 and sell it today you would earn a total of  89.00  from holding Pfizer Inc or generate 3.31% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

Allergan Plc  vs.  Pfizer Inc

 Performance 
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Allergan Plc 

Risk-Adjusted Performance

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Over the last 90 days Allergan Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Allergan Plc is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
Pfizer Inc 

Risk-Adjusted Performance

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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.

Allergan Plc and Pfizer Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Allergan Plc and Pfizer

The main advantage of trading using opposite Allergan Plc and Pfizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allergan Plc 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 idea behind Allergan Plc 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.
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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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