Correlation Between Colt CZ and Philip Morris

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

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

Diversification Opportunities for Colt CZ and Philip Morris

0.84

Correlation Coefficient

Colt CZ  Philip Morris

Very poor diversification

The 3 months correlation between Colt and Philip is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Colt CZ Group and Philip Morris CR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philip Morris CR and Colt CZ 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 Colt CZ Group are associated (or correlated) with Philip Morris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philip Morris CR has no effect on the direction of Colt CZ i.e., Colt CZ and Philip Morris go up and down completely randomly.

Pair Corralation between Colt CZ and Philip Morris

Assuming the 90 days trading horizon Colt CZ Group is expected to generate 1.44 times more return on investment than Philip Morris. However, Colt CZ is 1.44 times more volatile than Philip Morris CR. It trades about 0.19 of its potential returns per unit of risk. Philip Morris CR is currently generating about 0.16 per unit of risk. If you would invest  66,900  in Colt CZ Group on December 30, 2024 and sell it today you would earn a total of  8,100  from holding Colt CZ Group or generate 12.11% return on investment over 90 days.

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

Colt CZ Group  vs.  Philip Morris CR

Colt CZ Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Colt CZ Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Colt CZ may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Philip Morris CR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Philip Morris CR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Philip Morris may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Colt CZ and Philip Morris

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

The idea behind Colt CZ Group and Philip Morris CR 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.