Correlation Between Philip Morris and Treehouse Foods

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

Diversification Opportunities for Philip Morris and Treehouse Foods

-0.78

Correlation Coefficient

Philip Morris  Treehouse Foods

Pay attention - limited upside

The 3 months correlation between Philip and Treehouse is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and Treehouse Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Treehouse Foods 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 Treehouse Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Treehouse Foods has no effect on the direction of Philip Morris i.e., Philip Morris and Treehouse Foods go up and down completely randomly.

Pair Corralation between Philip Morris and Treehouse Foods

Allowing for the 90-day total investment horizon Philip Morris International is expected to generate 0.83 times more return on investment than Treehouse Foods. However, Philip Morris International is 1.21 times less risky than Treehouse Foods. It trades about 0.25 of its potential returns per unit of risk. Treehouse Foods is currently generating about -0.18 per unit of risk. If you would invest  11,896  in Philip Morris International on December 28, 2024 and sell it today you would earn a total of  3,620  from holding Philip Morris International or generate 30.43% return on investment over 90 days.

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

Philip Morris International  vs.  Treehouse Foods

Philip Morris Intern

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Philip Morris International are ranked lower than 19 (%) 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.

Treehouse Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Treehouse Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Philip Morris and Treehouse Foods

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

The idea behind Philip Morris International and Treehouse Foods 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.