Correlation Between Green Globe and Philip Morris

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

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

Diversification Opportunities for Green Globe and Philip Morris

-0.25

Correlation Coefficient

Green Globe  Philip Morris

Very good diversification

The 3 months correlation between Green and Philip is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Green Globe International and Philip Morris International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philip Morris Intern and Green Globe 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 Green Globe International 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 Intern has no effect on the direction of Green Globe i.e., Green Globe and Philip Morris go up and down completely randomly.

Pair Corralation between Green Globe and Philip Morris

Given the investment horizon of 90 days Green Globe International is expected to generate 13.5 times more return on investment than Philip Morris. However, Green Globe is 13.5 times more volatile than Philip Morris International. It trades about 0.05 of its potential returns per unit of risk. Philip Morris International is currently generating about 0.1 per unit of risk. If you would invest  0.10  in Green Globe International on September 22, 2024 and sell it today you would lose (0.06) from holding Green Globe International or give up 60.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.63%
Values	Daily Returns

Green Globe International  vs.  Philip Morris International

Green Globe International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Green Globe International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting forward indicators, Green Globe demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Philip Morris Intern

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Philip Morris International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Philip Morris is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Green Globe and Philip Morris

The main advantage of trading using opposite Green Globe and Philip Morris positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Green Globe 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 Green Globe International and Philip Morris International 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.