Correlation Between Altria and New Era

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

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

Diversification Opportunities for Altria and New Era

0.07

Correlation Coefficient

Altria  New Era

Significant diversification

The 3 months correlation between Altria and New is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Altria Group and New Era Helium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Era Helium 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 New Era. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Era Helium has no effect on the direction of Altria i.e., Altria and New Era go up and down completely randomly.

Pair Corralation between Altria and New Era

Allowing for the 90-day total investment horizon Altria Group is expected to under-perform the New Era. But the stock apears to be less risky and, when comparing its historical volatility, Altria Group is 14.22 times less risky than New Era. The stock trades about -0.17 of its potential returns per unit of risk. The New Era Helium is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  273.00  in New Era Helium on October 25, 2024 and sell it today you would earn a total of  29.00  from holding New Era Helium or generate 10.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Altria Group  vs.  New Era Helium

Altria Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Altria Group are ranked lower than 3 (%) 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.

New Era Helium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Era Helium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Altria and New Era

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

The idea behind Altria Group and New Era Helium 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.