Correlation Between Altria and Lifco AB

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

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

Diversification Opportunities for Altria and Lifco AB

-0.42

Correlation Coefficient

Altria  Lifco AB

Very good diversification

The 3 months correlation between Altria and Lifco is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Altria Group and Lifco AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifco AB 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 Lifco AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifco AB has no effect on the direction of Altria i.e., Altria and Lifco AB go up and down completely randomly.

Pair Corralation between Altria and Lifco AB

Allowing for the 90-day total investment horizon Altria Group is expected to under-perform the Lifco AB. But the stock apears to be less risky and, when comparing its historical volatility, Altria Group is 6.31 times less risky than Lifco AB. The stock trades about -0.15 of its potential returns per unit of risk. The Lifco AB is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,448  in Lifco AB on October 27, 2024 and sell it today you would earn a total of  202.00  from holding Lifco AB or generate 13.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Altria Group  vs.  Lifco AB

Altria Group

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Altria Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Lifco AB

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lifco AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental drivers, Lifco AB may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Altria and Lifco AB

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

The idea behind Altria Group and Lifco AB 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.