Correlation Between Philip Morris and Green Cures

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

Diversification Opportunities for Philip Morris and Green Cures

0.09

Correlation Coefficient

Philip Morris  Green Cures

Significant diversification

The 3 months correlation between Philip and Green is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and Green Cures Botanical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Cures Botanical 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 Green Cures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Cures Botanical has no effect on the direction of Philip Morris i.e., Philip Morris and Green Cures go up and down completely randomly.

Pair Corralation between Philip Morris and Green Cures

Allowing for the 90-day total investment horizon Philip Morris International is expected to under-perform the Green Cures. But the stock apears to be less risky and, when comparing its historical volatility, Philip Morris International is 51.34 times less risky than Green Cures. The stock trades about -0.24 of its potential returns per unit of risk. The Green Cures Botanical is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  0.02  in Green Cures Botanical on September 25, 2024 and sell it today you would earn a total of  0.00  from holding Green Cures Botanical or generate 0.0% return on investment over 90 days.

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

Philip Morris International  vs.  Green Cures Botanical

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.

Green Cures Botanical

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Green Cures Botanical are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent fundamental indicators, Green Cures unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Philip Morris and Green Cures

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

The idea behind Philip Morris International and Green Cures Botanical 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 Correlations module to find global opportunities by holding instruments from different markets.