Correlation Between Pfizer and WisdomTree Japan

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

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

Diversification Opportunities for Pfizer and WisdomTree Japan

-0.52

Correlation Coefficient

Pfizer  WisdomTree Japan

Excellent diversification

The 3 months correlation between Pfizer and WisdomTree is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and WisdomTree Japan Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Japan Hedged 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 WisdomTree Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Japan Hedged has no effect on the direction of Pfizer i.e., Pfizer and WisdomTree Japan go up and down completely randomly.

Pair Corralation between Pfizer and WisdomTree Japan

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the WisdomTree Japan. But the stock apears to be less risky and, when comparing its historical volatility, Pfizer Inc is 1.03 times less risky than WisdomTree Japan. The stock trades about -0.13 of its potential returns per unit of risk. The WisdomTree Japan Hedged is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  10,605  in WisdomTree Japan Hedged on August 23, 2024 and sell it today you would earn a total of  309.00  from holding WisdomTree Japan Hedged or generate 2.91% return on investment over 90 days.

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

Pfizer Inc  vs.  WisdomTree Japan Hedged

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 sluggish 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.

WisdomTree Japan Hedged

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Japan Hedged are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, WisdomTree Japan is not utilizing all of its potentials. The new stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Pfizer and WisdomTree Japan

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

The idea behind Pfizer Inc and WisdomTree Japan Hedged 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.