Correlation Between Alphabet and Philip Morris

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

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

Diversification Opportunities for Alphabet and Philip Morris

-0.82

Correlation Coefficient

Alphabet  Philip Morris

Pay attention - limited upside

The 3 months correlation between Alphabet and Philip is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C 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 Alphabet 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 Alphabet Inc Class C 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 Alphabet i.e., Alphabet and Philip Morris go up and down completely randomly.

Pair Corralation between Alphabet and Philip Morris

Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the Philip Morris. In addition to that, Alphabet is 1.12 times more volatile than Philip Morris International. It trades about -0.16 of its total potential returns per unit of risk. Philip Morris International is currently generating about 0.25 per unit of volatility. If you would invest  11,896  in Philip Morris International on December 28, 2024 and sell it today you would earn a total of  3,620  from holding Philip Morris International or generate 30.43% return on investment over 90 days.

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

Alphabet Inc Class C  vs.  Philip Morris International

Alphabet Class C

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alphabet Inc Class C has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Philip Morris Intern

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Philip Morris International are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent primary indicators, Philip Morris displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and Philip Morris

The main advantage of trading using opposite Alphabet and Philip Morris positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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 Alphabet Inc Class C 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.