Correlation Between Philip Morris and Tootsie Roll

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

Diversification Opportunities for Philip Morris and Tootsie Roll

0.18

Correlation Coefficient

Philip Morris  Tootsie Roll

Average diversification

The 3 months correlation between Philip and Tootsie is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and Tootsie Roll Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tootsie Roll Industries 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 Tootsie Roll. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tootsie Roll Industries has no effect on the direction of Philip Morris i.e., Philip Morris and Tootsie Roll go up and down completely randomly.

Pair Corralation between Philip Morris and Tootsie Roll

Allowing for the 90-day total investment horizon Philip Morris International is expected to generate 0.8 times more return on investment than Tootsie Roll. However, Philip Morris International is 1.24 times less risky than Tootsie Roll. It trades about 0.05 of its potential returns per unit of risk. Tootsie Roll Industries is currently generating about -0.04 per unit of risk. If you would invest  9,336  in Philip Morris International on October 24, 2024 and sell it today you would earn a total of  2,953  from holding Philip Morris International or generate 31.63% 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.  Tootsie Roll Industries

Philip Morris Intern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Philip Morris International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Tootsie Roll Industries

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tootsie Roll Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Tootsie Roll is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Philip Morris and Tootsie Roll

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

The idea behind Philip Morris International and Tootsie Roll Industries 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.