Correlation Between Altria and Anheuser Busch

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

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

Diversification Opportunities for Altria and Anheuser Busch

0.87

Correlation Coefficient

Altria  Anheuser Busch

Very poor diversification

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

Pair Corralation between Altria and Anheuser Busch

Allowing for the 90-day total investment horizon Altria Group is expected to generate 0.93 times more return on investment than Anheuser Busch. However, Altria Group is 1.08 times less risky than Anheuser Busch. It trades about 0.12 of its potential returns per unit of risk. Anheuser Busch Inbev is currently generating about -0.13 per unit of risk. If you would invest  4,929  in Altria Group on November 27, 2024 and sell it today you would earn a total of  671.00  from holding Altria Group or generate 13.61% return on investment over 90 days.

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

Altria Group  vs.  Anheuser Busch Inbev

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.

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.

Pair Trading with Altria and Anheuser Busch

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

The idea behind Altria Group and Anheuser Busch Inbev 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.