Correlation Between Altria and MARATHON

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

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

Diversification Opportunities for Altria and MARATHON

-0.06

Correlation Coefficient

Altria  MARATHON

Good diversification

The 3 months correlation between Altria and MARATHON is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Altria Group and MARATHON PETE P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MARATHON PETE P 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 MARATHON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MARATHON PETE P has no effect on the direction of Altria i.e., Altria and MARATHON go up and down completely randomly.

Pair Corralation between Altria and MARATHON

Allowing for the 90-day total investment horizon Altria Group is expected to under-perform the MARATHON. But the stock apears to be less risky and, when comparing its historical volatility, Altria Group is 1.39 times less risky than MARATHON. The stock trades about -0.13 of its potential returns per unit of risk. The MARATHON PETE P is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  9,605  in MARATHON PETE P on October 23, 2024 and sell it today you would lose (107.00) from holding MARATHON PETE P or give up 1.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	73.68%
Values	Daily Returns

Altria Group  vs.  MARATHON PETE P

Altria Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Altria Group are ranked lower than 5 (%) 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.

MARATHON PETE P

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days MARATHON PETE P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MARATHON is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Altria and MARATHON

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

The idea behind Altria Group and MARATHON PETE P 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.