Correlation Between Philip Morris and Suntory Beverage

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

Diversification Opportunities for Philip Morris and Suntory Beverage

0.06

Correlation Coefficient

Philip Morris  Suntory Beverage

Significant diversification

The 3 months correlation between Philip and Suntory is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and Suntory Beverage Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suntory Beverage Food 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 Suntory Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suntory Beverage Food has no effect on the direction of Philip Morris i.e., Philip Morris and Suntory Beverage go up and down completely randomly.

Pair Corralation between Philip Morris and Suntory Beverage

Assuming the 90 days horizon Philip Morris International is expected to generate 0.64 times more return on investment than Suntory Beverage. However, Philip Morris International is 1.57 times less risky than Suntory Beverage. It trades about 0.1 of its potential returns per unit of risk. Suntory Beverage Food is currently generating about -0.21 per unit of risk. If you would invest  11,614  in Philip Morris International on October 23, 2024 and sell it today you would earn a total of  194.00  from holding Philip Morris International or generate 1.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.12%
Values	Daily Returns

Philip Morris International  vs.  Suntory Beverage Food

Philip Morris Intern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Philip Morris International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Philip Morris is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Suntory Beverage Food

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Suntory Beverage Food has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Philip Morris and Suntory Beverage

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

The idea behind Philip Morris International and Suntory Beverage Food 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.