Correlation Between Philip Morris and SIDETRADE

Can any of the company-specific risk be diversified away by investing in both Philip Morris and SIDETRADE 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 SIDETRADE 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 SIDETRADE EO 1, you can compare the effects of market volatilities on Philip Morris and SIDETRADE 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 SIDETRADE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philip Morris and SIDETRADE.

Diversification Opportunities for Philip Morris and SIDETRADE

0.22

Correlation Coefficient

Philip Morris  SIDETRADE

Modest diversification

The 3 months correlation between Philip and SIDETRADE is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and SIDETRADE EO 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIDETRADE EO 1 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 SIDETRADE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIDETRADE EO 1 has no effect on the direction of Philip Morris i.e., Philip Morris and SIDETRADE go up and down completely randomly.

Pair Corralation between Philip Morris and SIDETRADE

Assuming the 90 days horizon Philip Morris International is expected to generate 0.9 times more return on investment than SIDETRADE. However, Philip Morris International is 1.12 times less risky than SIDETRADE. It trades about 0.06 of its potential returns per unit of risk. SIDETRADE EO 1 is currently generating about 0.02 per unit of risk. If you would invest  11,568  in Philip Morris International on October 7, 2024 and sell it today you would earn a total of  290.00  from holding Philip Morris International or generate 2.51% return on investment over 90 days.

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

Philip Morris International  vs.  SIDETRADE EO 1

Philip Morris Intern

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Philip Morris International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Philip Morris may actually be approaching a critical reversion point that can send shares even higher in February 2025.

SIDETRADE EO 1

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days SIDETRADE EO 1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SIDETRADE 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 SIDETRADE

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

The idea behind Philip Morris International and SIDETRADE EO 1 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.