Correlation Between Philip Morris and CVW CleanTech

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

Diversification Opportunities for Philip Morris and CVW CleanTech

-0.41

Correlation Coefficient

Philip Morris  CVW CleanTech

Very good diversification

The 3 months correlation between Philip and CVW is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and CVW CleanTech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVW CleanTech 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 CVW CleanTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVW CleanTech has no effect on the direction of Philip Morris i.e., Philip Morris and CVW CleanTech go up and down completely randomly.

Pair Corralation between Philip Morris and CVW CleanTech

Allowing for the 90-day total investment horizon Philip Morris is expected to generate 4.22 times less return on investment than CVW CleanTech. But when comparing it to its historical volatility, Philip Morris International is 1.63 times less risky than CVW CleanTech. It trades about 0.03 of its potential returns per unit of risk. CVW CleanTech is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  59.00  in CVW CleanTech on September 15, 2024 and sell it today you would earn a total of  6.00  from holding CVW CleanTech or generate 10.17% return on investment over 90 days.

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

Philip Morris International  vs.  CVW CleanTech

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 current stock price disarray, may contribute to short-term losses for the investors.

CVW CleanTech

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CVW CleanTech are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, CVW CleanTech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Philip Morris and CVW CleanTech

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

The idea behind Philip Morris International and CVW CleanTech 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.