Correlation Between Philip Morris and 532716AN7

Can any of the company-specific risk be diversified away by investing in both Philip Morris and 532716AN7 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 532716AN7 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 L Brands 76, you can compare the effects of market volatilities on Philip Morris and 532716AN7 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 532716AN7. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philip Morris and 532716AN7.

Diversification Opportunities for Philip Morris and 532716AN7

0.25

Correlation Coefficient

Philip Morris  532716AN7

Modest diversification

The 3 months correlation between Philip and 532716AN7 is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and L Brands 76 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L Brands 76 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 532716AN7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of L Brands 76 has no effect on the direction of Philip Morris i.e., Philip Morris and 532716AN7 go up and down completely randomly.

Pair Corralation between Philip Morris and 532716AN7

Allowing for the 90-day total investment horizon Philip Morris International is expected to under-perform the 532716AN7. In addition to that, Philip Morris is 1.07 times more volatile than L Brands 76. It trades about -0.24 of its total potential returns per unit of risk. L Brands 76 is currently generating about -0.15 per unit of volatility. If you would invest  10,358  in L Brands 76 on October 10, 2024 and sell it today you would lose (240.00) from holding L Brands 76 or give up 2.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

Philip Morris International  vs.  L Brands 76

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.

L Brands 76

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in L Brands 76 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 532716AN7 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Philip Morris and 532716AN7

The main advantage of trading using opposite Philip Morris and 532716AN7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Philip Morris position performs unexpectedly, 532716AN7 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 532716AN7 will offset losses from the drop in 532716AN7's long position.

The idea behind Philip Morris International and L Brands 76 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.