Correlation Between Pfizer and Terns Pharmaceuticals

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

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

Diversification Opportunities for Pfizer and Terns Pharmaceuticals

0.33

Correlation Coefficient

Pfizer  Terns Pharmaceuticals

Weak diversification

The 3 months correlation between Pfizer and Terns is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Terns Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terns Pharmaceuticals 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 Terns Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terns Pharmaceuticals has no effect on the direction of Pfizer i.e., Pfizer and Terns Pharmaceuticals go up and down completely randomly.

Pair Corralation between Pfizer and Terns Pharmaceuticals

Considering the 90-day investment horizon Pfizer Inc is expected to generate 0.25 times more return on investment than Terns Pharmaceuticals. However, Pfizer Inc is 4.03 times less risky than Terns Pharmaceuticals. It trades about 0.01 of its potential returns per unit of risk. Terns Pharmaceuticals is currently generating about -0.02 per unit of risk. If you would invest  2,919  in Pfizer Inc on July 21, 2024 and sell it today you would earn a total of  3.00  from holding Pfizer Inc or generate 0.1% return on investment over 90 days.

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

Pfizer Inc  vs.  Terns Pharmaceuticals

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.

Terns Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Pfizer and Terns Pharmaceuticals

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

The idea behind Pfizer Inc and Terns Pharmaceuticals 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .