Correlation Between General Mills and Altria

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

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

Diversification Opportunities for General Mills and Altria

0.02

Correlation Coefficient

General Mills  Altria

Significant diversification

The 3 months correlation between General and Altria is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding General Mills and Altria Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altria Group and General Mills 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 General Mills 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 General Mills i.e., General Mills and Altria go up and down completely randomly.

Pair Corralation between General Mills and Altria

Considering the 90-day investment horizon General Mills is expected to under-perform the Altria. In addition to that, General Mills is 1.48 times more volatile than Altria Group. It trades about -0.04 of its total potential returns per unit of risk. Altria Group is currently generating about 0.17 per unit of volatility. If you would invest  5,116  in Altria Group on December 28, 2024 and sell it today you would earn a total of  659.00  from holding Altria Group or generate 12.88% return on investment over 90 days.

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

General Mills  vs.  Altria Group

General Mills

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Mills has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, General Mills is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Altria Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Altria Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Altria displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with General Mills and Altria

The main advantage of trading using opposite General Mills and Altria positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Mills 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 General Mills 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.