Correlation Between Pfizer and Perrigo Company

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

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

Diversification Opportunities for Pfizer and Perrigo Company

0.44

Correlation Coefficient

Pfizer  Perrigo Company

Very weak diversification

The 3 months correlation between Pfizer and Perrigo is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Perrigo Company PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perrigo Company 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 Perrigo Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perrigo Company has no effect on the direction of Pfizer i.e., Pfizer and Perrigo Company go up and down completely randomly.

Pair Corralation between Pfizer and Perrigo Company

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the Perrigo Company. But the stock apears to be less risky and, when comparing its historical volatility, Pfizer Inc is 1.35 times less risky than Perrigo Company. The stock trades about -0.07 of its potential returns per unit of risk. The Perrigo Company PLC is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,046  in Perrigo Company PLC on January 26, 2024 and sell it today you would earn a total of  77.00  from holding Perrigo Company PLC or generate 2.53% return on investment over 90 days.

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

Pfizer Inc  vs.  Perrigo Company PLC

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Perrigo Company

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Pfizer and Perrigo Company

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

The idea behind Pfizer Inc and Perrigo Company PLC 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.