Correlation Between Anheuser Busch and Altria

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

By analyzing existing cross correlation between Anheuser Busch Inbev and Altria Group, you can compare the effects of market volatilities on Anheuser Busch and Altria 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 Anheuser Busch with a short position of Altria. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anheuser Busch and Altria.

Diversification Opportunities for Anheuser Busch and Altria

0.87

Correlation Coefficient

Anheuser Busch  Altria

Very poor diversification

The 3 months correlation between Anheuser and Altria is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Anheuser Busch Inbev and Altria Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altria Group and Anheuser Busch 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 Anheuser Busch Inbev are associated (or correlated) with Altria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altria Group has no effect on the direction of Anheuser Busch i.e., Anheuser Busch and Altria go up and down completely randomly.

Pair Corralation between Anheuser Busch and Altria

Considering the 90-day investment horizon Anheuser Busch Inbev is expected to generate 1.26 times more return on investment than Altria. However, Anheuser Busch is 1.26 times more volatile than Altria Group. It trades about 0.02 of its potential returns per unit of risk. Altria Group is currently generating about -0.01 per unit of risk. If you would invest  5,408  in Anheuser Busch Inbev on November 27, 2024 and sell it today you would earn a total of  66.00  from holding Anheuser Busch Inbev or generate 1.22% return on investment over 90 days.

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

Anheuser Busch Inbev  vs.  Altria Group

Anheuser Busch Inbev

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Anheuser Busch Inbev are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Anheuser Busch is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Altria Group

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Anheuser Busch and Altria

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

The idea behind Anheuser Busch Inbev and Altria 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.

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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 CEOs Directory module to screen CEOs from public companies around the world.