Correlation Between Mustang Bio and Pfizer

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

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

Diversification Opportunities for Mustang Bio and Pfizer

0.63

Correlation Coefficient

Mustang Bio  Pfizer

Poor diversification

The 3 months correlation between Mustang and Pfizer is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Mustang Bio and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc and Mustang Bio 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 Mustang Bio 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 Mustang Bio i.e., Mustang Bio and Pfizer go up and down completely randomly.

Pair Corralation between Mustang Bio and Pfizer

Given the investment horizon of 90 days Mustang Bio is expected to under-perform the Pfizer. In addition to that, Mustang Bio is 3.98 times more volatile than Pfizer Inc. It trades about -0.17 of its total potential returns per unit of risk. Pfizer Inc is currently generating about -0.11 per unit of volatility. If you would invest  4,190  in Pfizer Inc on January 29, 2024 and sell it today you would lose (1,650) from holding Pfizer Inc or give up 39.38% of portfolio value over 90 days.

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

Mustang Bio  vs.  Pfizer Inc

Mustang Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mustang Bio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

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 latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Mustang Bio and Pfizer

The main advantage of trading using opposite Mustang Bio and Pfizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mustang Bio 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 Mustang Bio 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.