Correlation Between Philip Morris and Safety Shot

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

Diversification Opportunities for Philip Morris and Safety Shot

-0.36

Correlation Coefficient

Philip Morris  Safety Shot

Very good diversification

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

Pair Corralation between Philip Morris and Safety Shot

Allowing for the 90-day total investment horizon Philip Morris International is expected to under-perform the Safety Shot. But the stock apears to be less risky and, when comparing its historical volatility, Philip Morris International is 22.78 times less risky than Safety Shot. The stock trades about -0.27 of its potential returns per unit of risk. The Safety Shot is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Safety Shot on October 5, 2024 and sell it today you would earn a total of  3.00  from holding Safety Shot or generate 27.27% return on investment over 90 days.

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

Philip Morris International  vs.  Safety Shot

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.

Safety Shot

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Safety Shot are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Safety Shot showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Philip Morris and Safety Shot

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

The idea behind Philip Morris International and Safety Shot 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.