Correlation Between Philip Morris and CHS

Can any of the company-specific risk be diversified away by investing in both Philip Morris and CHS 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 CHS 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 CHS Inc Pref, you can compare the effects of market volatilities on Philip Morris and CHS 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 CHS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philip Morris and CHS.

Diversification Opportunities for Philip Morris and CHS

-0.17

Correlation Coefficient

Philip Morris  CHS

Good diversification

The 3 months correlation between Philip and CHS is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and CHS Inc Pref in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHS Inc Pref 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 CHS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHS Inc Pref has no effect on the direction of Philip Morris i.e., Philip Morris and CHS go up and down completely randomly.

Pair Corralation between Philip Morris and CHS

Allowing for the 90-day total investment horizon Philip Morris International is expected to generate 2.45 times more return on investment than CHS. However, Philip Morris is 2.45 times more volatile than CHS Inc Pref. It trades about -0.01 of its potential returns per unit of risk. CHS Inc Pref is currently generating about -0.11 per unit of risk. If you would invest  13,033  in Philip Morris International on September 5, 2024 and sell it today you would lose (64.00) from holding Philip Morris International or give up 0.49% of portfolio value over 90 days.

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

Philip Morris International  vs.  CHS Inc Pref

Philip Morris Intern

Risk-Adjusted Performance

3 of 100

Insignificant

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

CHS Inc Pref

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CHS Inc Pref are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, CHS is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Philip Morris and CHS

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

The idea behind Philip Morris International and CHS Inc Pref 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.