Correlation Between Perrigo Company and Pfizer

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

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

Diversification Opportunities for Perrigo Company and Pfizer

0.44

Correlation Coefficient

Perrigo Company  Pfizer

Very weak diversification

The 3 months correlation between Perrigo and Pfizer is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Perrigo Company PLC and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc and Perrigo Company 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 Perrigo Company 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 Perrigo Company i.e., Perrigo Company and Pfizer go up and down completely randomly.

Pair Corralation between Perrigo Company and Pfizer

Given the investment horizon of 90 days Perrigo Company PLC is expected to generate 1.67 times more return on investment than Pfizer. However, Perrigo Company is 1.67 times more volatile than Pfizer Inc. It trades about 0.05 of its potential returns per unit of risk. Pfizer Inc is currently generating about -0.22 per unit of risk. If you would invest  3,080  in Perrigo Company PLC on January 26, 2024 and sell it today you would earn a total of  43.00  from holding Perrigo Company PLC or generate 1.4% return on investment over 90 days.

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

Perrigo Company PLC  vs.  Pfizer Inc

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.

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.

Pair Trading with Perrigo Company and Pfizer

The main advantage of trading using opposite Perrigo Company and Pfizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Perrigo Company 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 Perrigo Company 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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.