Correlation Between Pfizer and Zoetis

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

Diversification Opportunities for Pfizer and Zoetis

0.14
  Correlation Coefficient

Average diversification

The 3 months correlation between Pfizer and Zoetis is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Zoetis Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoetis Inc 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 Zoetis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoetis Inc has no effect on the direction of Pfizer i.e., Pfizer and Zoetis go up and down completely randomly.

Pair Corralation between Pfizer and Zoetis

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the Zoetis. But the stock apears to be less risky and, when comparing its historical volatility, Pfizer Inc is 1.21 times less risky than Zoetis. The stock trades about -0.08 of its potential returns per unit of risk. The Zoetis Inc is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  17,638  in Zoetis Inc on December 29, 2023 and sell it today you would lose (787.00) from holding Zoetis Inc or give up 4.46% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Pfizer Inc  vs.  Zoetis Inc

 Performance 
       Timeline  
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.
Zoetis Inc 

Risk-Adjusted Performance

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Low
 
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Very Weak
Over the last 90 days Zoetis Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pfizer and Zoetis Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Pfizer and Zoetis

The main advantage of trading using opposite Pfizer and Zoetis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pfizer position performs unexpectedly, Zoetis 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 Zoetis will offset losses from the drop in Zoetis' long position.
The idea behind Pfizer Inc and Zoetis 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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