Correlation Between Philip Morris and Games Workshop

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

Diversification Opportunities for Philip Morris and Games Workshop

0.75

Correlation Coefficient

Philip Morris  Games Workshop

Poor diversification

The 3 months correlation between Philip and Games is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and Games Workshop Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Games Workshop Group 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 Games Workshop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Games Workshop Group has no effect on the direction of Philip Morris i.e., Philip Morris and Games Workshop go up and down completely randomly.

Pair Corralation between Philip Morris and Games Workshop

Assuming the 90 days horizon Philip Morris International is expected to generate 1.1 times more return on investment than Games Workshop. However, Philip Morris is 1.1 times more volatile than Games Workshop Group. It trades about 0.19 of its potential returns per unit of risk. Games Workshop Group is currently generating about 0.11 per unit of risk. If you would invest  11,522  in Philip Morris International on December 22, 2024 and sell it today you would earn a total of  2,498  from holding Philip Morris International or generate 21.68% return on investment over 90 days.

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

Philip Morris International  vs.  Games Workshop Group

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 14 (%) 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.

Games Workshop Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Games Workshop Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Games Workshop may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Philip Morris and Games Workshop

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

The idea behind Philip Morris International and Games Workshop Group 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 Global Correlations module to find global opportunities by holding instruments from different markets.