Correlation Between Philip Morris and Tradeweb Markets

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

By analyzing existing cross correlation between Philip Morris International and Tradeweb Markets, you can compare the effects of market volatilities on Philip Morris and Tradeweb Markets 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 Philip Morris with a short position of Tradeweb Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philip Morris and Tradeweb Markets.

Diversification Opportunities for Philip Morris and Tradeweb Markets

-0.3

Correlation Coefficient

Philip Morris  Tradeweb Markets

Very good diversification

The 3 months correlation between Philip and Tradeweb is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and Tradeweb Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tradeweb Markets and Philip Morris 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 Philip Morris International are associated (or correlated) with Tradeweb Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tradeweb Markets has no effect on the direction of Philip Morris i.e., Philip Morris and Tradeweb Markets go up and down completely randomly.

Pair Corralation between Philip Morris and Tradeweb Markets

Assuming the 90 days horizon Philip Morris International is expected to generate 1.0 times more return on investment than Tradeweb Markets. However, Philip Morris International is 1.0 times less risky than Tradeweb Markets. It trades about 0.19 of its potential returns per unit of risk. Tradeweb Markets is currently generating about 0.04 per unit of risk. If you would invest  11,521  in Philip Morris International on December 23, 2024 and sell it today you would earn a total of  2,557  from holding Philip Morris International or generate 22.19% return on investment over 90 days.

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

Philip Morris International  vs.  Tradeweb Markets

Philip Morris Intern

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Philip Morris International are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Philip Morris reported solid returns over the last few months and may actually be approaching a breakup point.

Tradeweb Markets

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tradeweb Markets are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Tradeweb Markets is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Philip Morris and Tradeweb Markets

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

The idea behind Philip Morris International and Tradeweb Markets 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.