Correlation Between Philip Morris and Cool

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Philip Morris and Cool 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 Cool 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 Cool Company, you can compare the effects of market volatilities on Philip Morris and Cool 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 Cool. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philip Morris and Cool.

Diversification Opportunities for Philip Morris and Cool

-0.36
  Correlation Coefficient

Very good diversification

The 3 months correlation between Philip and Cool is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and Cool Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cool Company 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 Cool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cool Company has no effect on the direction of Philip Morris i.e., Philip Morris and Cool go up and down completely randomly.

Pair Corralation between Philip Morris and Cool

Allowing for the 90-day total investment horizon Philip Morris International is expected to generate 0.53 times more return on investment than Cool. However, Philip Morris International is 1.88 times less risky than Cool. It trades about 0.08 of its potential returns per unit of risk. Cool Company is currently generating about -0.03 per unit of risk. If you would invest  8,469  in Philip Morris International on October 3, 2024 and sell it today you would earn a total of  3,566  from holding Philip Morris International or generate 42.11% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Philip Morris International  vs.  Cool Company

 Performance 
       Timeline  
Philip Morris Intern 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
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.
Cool Company 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Cool Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Philip Morris and Cool Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Philip Morris and Cool

The main advantage of trading using opposite Philip Morris and Cool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Philip Morris position performs unexpectedly, Cool 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 Cool will offset losses from the drop in Cool's long position.
The idea behind Philip Morris International and Cool Company 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.
Check out your portfolio center.
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

Other Complementary Tools

Idea Optimizer
Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio
Portfolio Comparator
Compare the composition, asset allocations and performance of any two portfolios in your account
Portfolio Volatility
Check portfolio volatility and analyze historical return density to properly model market risk
Balance Of Power
Check stock momentum by analyzing Balance Of Power indicator and other technical ratios
Equity Search
Search for actively traded equities including funds and ETFs from over 30 global markets