Correlation Between Philip Morris and Oak View

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

Diversification Opportunities for Philip Morris and Oak View

0.3

Correlation Coefficient

Philip Morris  Oak View

Weak diversification

The 3 months correlation between Philip and Oak is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and Oak View National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oak View National 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 Oak View. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oak View National has no effect on the direction of Philip Morris i.e., Philip Morris and Oak View go up and down completely randomly.

Pair Corralation between Philip Morris and Oak View

Allowing for the 90-day total investment horizon Philip Morris International is expected to generate 1.08 times more return on investment than Oak View. However, Philip Morris is 1.08 times more volatile than Oak View National. It trades about 0.19 of its potential returns per unit of risk. Oak View National is currently generating about 0.0 per unit of risk. If you would invest  12,466  in Philip Morris International on December 17, 2024 and sell it today you would earn a total of  2,722  from holding Philip Morris International or generate 21.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	77.05%
Values	Daily Returns

Philip Morris International  vs.  Oak View National

Philip Morris Intern

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Philip Morris International are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent primary indicators, Philip Morris displayed solid returns over the last few months and may actually be approaching a breakup point.

Oak View National

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oak View National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward-looking signals, Oak View is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Philip Morris and Oak View

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

The idea behind Philip Morris International and Oak View National 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.