Correlation Between Philip Morris and Ark Restaurants

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

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

Diversification Opportunities for Philip Morris and Ark Restaurants

-0.26

Correlation Coefficient

Philip Morris  Ark Restaurants

Very good diversification

The 3 months correlation between Philip and Ark is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and Ark Restaurants Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ark Restaurants Corp and Philip Morris 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 Philip Morris International are associated (or correlated) with Ark Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ark Restaurants Corp has no effect on the direction of Philip Morris i.e., Philip Morris and Ark Restaurants go up and down completely randomly.

Pair Corralation between Philip Morris and Ark Restaurants

Allowing for the 90-day total investment horizon Philip Morris is expected to generate 9.19 times less return on investment than Ark Restaurants. But when comparing it to its historical volatility, Philip Morris International is 3.26 times less risky than Ark Restaurants. It trades about 0.03 of its potential returns per unit of risk. Ark Restaurants Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,196  in Ark Restaurants Corp on October 12, 2024 and sell it today you would earn a total of  303.00  from holding Ark Restaurants Corp or generate 25.33% return on investment over 90 days.

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

Philip Morris International  vs.  Ark Restaurants Corp

Philip Morris Intern

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Philip Morris International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Philip Morris is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Ark Restaurants Corp

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ark Restaurants Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent forward-looking signals, Ark Restaurants reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Philip Morris and Ark Restaurants

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

The idea behind Philip Morris International and Ark Restaurants Corp 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.